When you buy a put option, you’re buying the right to sell shares at the strike price outlined in the contract. If the stock’s price falls below the strike price, you can sell the shares at a higher price than what those shares are trading for in the market, and earn a profit. Conversely, traders …
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Call And Put Options: Buying & Selling Guide
Perhaps the investor doesn’t believe ABC stock will necessarily decline that far. The higher strike creates a higher breakeven — but also requires a higher price. The near-term $90 put option costs only $2; the 100 strike (known as ‘at the money’) could cost $7. That option breaks even at a higher level — ABC …