Home
Stocks Simplified Blog
What are Stocks?
Your Questions
Investing Goals
Fundamental Analysis
Technical Analysis
Portfolio Management
Options
Brokers
Contact Us
Chart Patterns
Other Money Sites
Stock Trend
YOUR success
Stock Chart Settings
Oscillators
Different trading types
Candlestick Patterns
Stock Market Articles
Option Greeks
Financial Ratios
Webmasters
Taxes
Mutual Funds
History
Trading Terms
Your Plan
Option Spreads
Spread The Word
What are ETFs
Trading Stock Opitons
Stock Tips
Stock Market Books
Stock Orders
Types Of Insider Trading
Momentum Investing
Stock Market Videos
Trading Strategies
Stock Market News
401k Information
IRA Account Rules
 Commodity Trading
Stock indexes history

Put Option

A put option allows you to make money from a falling stock. It is like shorting stocks only you get leverage on your side.

What the contract is is an agreement between 2 parties to be able to sell a stock at a given price on or before a given date. So for instance if you buy a $30 put on a stock you are able to sell the stock at $30 on or before a given strike date. As the stock falls further your put option becomes worth more.

Max Loss

Unlike shorting stock the most you can possible lose on a put option is the premium you paid for it. So if you paid $2 for the right to sell it at $30 the most you can lose is $2.

Max Gain

Your max gain would be if the stock went to $0. If the stock went to $0 you could buy it at $0 and sell it at $30. Of course that is very unlikely. But if the stock goes to $20 or $15 buying the $30 put can be very profitable.

My Experience

These options can be very profitable. The only problem is that they can also work against you. To use them correctly you want to trade them on stocks you are short term bearish on and you want to make sure the investment does not make up a significant amount of your portfolio.

Search Our Site

Looking for a broker with low commissions? Try Zecco they give you 10 free trades a month. We all want free trades through Zecco!

Does Finding Stocks On The Net With A Greater Than 90% Chance Of Going Up Near Term with 3 simple rules excite you? Get your free trial of The $17 Stock Trading System

Know When To Buy and When to Sell With this free Weekly Newsletter, available only at WallStreetWindow.Com

Do you want to learn how to trade options for huge profits? If so you’ll want to check out Stephen Cooper’s Option Trading handbook.



footer for put option page