Definition european put option

Definition european put option

Author: SunR Date: 25.05.2017

Buying a put option gives you the right to sell the specific financial instrument underlying the option at a specific price, called the exercise or strike price, to the writer, or seller, of the option before the option expires. You pay the seller a premium for the option, and if you exercise your right to sell, the seller must buy.

Selling a put option means you collect a premium at the time of sale.

Definition of 'European Options' - The Economic Times

But you must buy the option's underlying instrument if the option buyer exercises the option and you are assigned to meet the contract's terms. Not surprisingly, buyers and sellers have different goals. Buyers hope that the price of the underlying instrument drops so they can sell at the exercise price, which is higher than the market price.

definition european put option

This way, they could offset the price of the premium, and hopefully make a profit as well. Sellers, on the other hand, hope that the price stays the same or increases, so they can keep the premium they've collected and not have to lay out money to buy.

definition european put option

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European put option financial definition of European put option http: Dictionary, Encyclopedia and Thesaurus - The Free Dictionary 9,, visitors served. A A A A Language: Register Log in Sign up with one click: Dictionary Thesaurus Call forwarding blackberry curve 8900 Dictionary Legal Dictionary Financial Dictionary.

Tools A A A A Language: Free content Linking Lookup box. Put option This security gives investors the right to sell or put a fixed number of shares at a fixed price within a given period.

An investorfor example, might wish to have the right to sell shares of a stock at a certain price by a certain time in order to protect, or hedgean existing investment. An option contract in which the definition european put option has the right but not the obligation to sell some underlying asset at an agreed-upon price on or before the expiration date of the contract, regardless of the prevailing market price of the underlying asset.

One buys a put option if one believes the price for the underlying asset will fall by the end of the contract. If the price does fall, the holder may buy and resell the underlying asset for a profit.

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If the price does not fall, the option expires and the holder's loss is limited to the price of buying the contract. Put options may be used on their own or in conjunction with call options to create an option spread in order to hedge risk. Please log in or register to use bookmarks.

What does put option mean?

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Definition of 'European Options' - The Economic Times

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