put option

Thân thiện

A trader purchases a put option to hedge against a potential decline in a stock's price.

Definition

Noun: 1. A financial contract granting the right, but not the obligation, to sell a specific asset at a predetermined price on or before a specified date. This is the primary financial meaning. The buyer of a put option pays a premium for this right, typically hoping the asset's market price will fall below the predetermined "strike" price. 2. The option or right to sell. In a broader, non-financial context, it can refer more generally to having the choice or opportunity to sell something.

Usage Examples

• Noun (Financial):
  • He bought a put option on the company's stock to hedge against a potential decline in its value.
  • The investor exercised her put option when the market price fell sharply below the strike price.
• Noun (General):
  • The contract gives the author a put option, allowing her to require the publisher to buy back the rights after five years.

Advanced Usage

• "To be long a put option": To be the buyer or holder of a put option, benefiting if the asset's price decreases.
  • The fund is long put options on the index as a form of insurance.
• "To be short a put option": To be the seller or writer of a put option, obligating oneself to buy the asset if the buyer exercises the option. The seller profits from the premium if the price stays above the strike price.
  • By shorting put options, the trader collects premium income but takes on significant risk.

Variants and Related Words

• Put (n., informal): A common shortened form of "put option" in financial contexts.
  • He bought puts on the tech sector.
• Call Option (n.): The opposite financial contract, granting the right to an asset at a set price.
• Option Premium (n.): The price paid by the buyer to the seller to acquire the option contract.
• Strike Price (n.): The predetermined price at which the asset can be sold (for a put) or bought (for a call).

Synonyms

• Sell option (less common)
• Right to sell

Related Phrases

• Protective put: An investment strategy involving buying a put option to hedge against a decline in an asset you already own.
  • She used a protective put to limit downside risk on her stock portfolio.
• Put-call parity: A financial theory defining the relationship between the prices of put options, call options, and the underlying asset.

Học thuật

Noun

1. the option to sell a given stock (or stock index or commodity future) at a given price before a given date
2. an option to sell

Từ đồng nghĩa

• put