A long put option is somewhat similar in strategy to short selling, aka shorting.
In effect, says Mr Rosgen, this is like an “implied put option” on South Korea's worst companies.
Four years after that, the C.B.O.E. introduced the “put” option—thus institutionalizing the bet that the thing you were betting on would lose.
The results led Claire Kent, an analyst with Morgan Stanley in London, to issue a report in which she asserted that the $85.52 put option ''greatly underestimates Gucci's true value'' -- provided, she added, that current management stays in place.
In a sense, a long put option is a sort of a short position, in that you're betting a stock's price will sink in the future.
The strategy involves simultaneously buying a cheap out-of-the-money put option while writing an out-of-the-money call option.
What was left was essentially a put option, which gave investors the right to force UBS to buy the banks' shares at a set price.
Conversely, buying a put option means that you're counting on the price of the Big Tech Company falling before the expiration date.
A long put option can also serve as a hedge, or insurance, against a bad outcome with a long call option or an outright purchase of stock.
Investors leveraging a protective put often buy a put option with a strike price equal, or close to, the current price of the asset that they already hold.
What he recommends: Buying a "put spread collar" on the S&P 500 by buying a cheap out-of-the-money put option while writing an out-of-the-money call option.
The embattled car maker tried to quash speculation that it was preparing for a takeover by General Motors even before 2004, when Fiat can exercise a put option.
In addition to being less risky, long options also include an unlimited profit potential to the upside in the case of a long call option or the downside with a long put option.
Analyst comment: "In March 2020, at the start of the COVID-19 pandemic, the cost of a 95%-strike one-month put option on the S&P 500 surged from 0.5% to 7% in less than a month.
This approach became known as the “Greenspan put” (Alan Greenspan was the chairman of the Fed from 1987 to 2006, and the put option is a form of insurance against falling prices).
They zeroed in on the earnings-linked straddle, a strategy that involves picking a stock and simultaneously buying its call and put option with the same expiration date and strike price.
If the stock rises above the strike price, the put-option holder (who bet it would fall) will let the option expire, letting the option seller walk away with the premium.
In the case of naked calls, this involves selling a call option without already owning the underlying security, while in the case of naked puts, it involves selling a put option without short-selling the security.
The non-recourse status of mortgages in large parts of America, for instance, gives the borrower a highly attractive put option: he can, in effect, sell the house to the lender at any time for the principal outstanding.
Investors receive a minimal yield on the initial investment as they wait for a sponsor to identify a target and then have a put option to redeem their shares with accrued interest if they do not like the acquisition, Kostin said.
put option
noun possession
- an option to sell
noun act
- the option to sell a given stock (or stock index or commodity future) at a given price before a given date
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