To breakeven at expiration, you need for the underlying stock price to be below the strike price plus the premium you paid for the option.įor example, if you paid $5.00 for a 100 put, and the stock is at 97, you would still be losing money ($2 x 100 = $200) because you must make up for the cost of the option itself.īecause of this, you really want the stock to go well below your strike price (depending on how much you paid for the As time progresses and the stock price changes, you will see the option price (and your unrealized gain/loss) move as well. However, since you now own an option of equal value, the balance of your trading account will not immediately adjust much (since you can sell your option back for roughly the price you paid for it). Since a long put is a debit strategy, it will result in cash taken out of your account to buy the option. If your account is only approved for a lower level, this is probably the only action you can take anyways. Submit the order! Double check that you are "buying to open", and not "selling to open", which is a different strategy (a short put). (A market order will allow you to purchase immediately, however the price you purchase at is up to the market to decide, meaning you could get an unfavorable price if the market moves quickly or if there is low liquidity) Brokers will usually fill this price in automatically based on the best price available, however some will allow for "market orders", which are not recommended for options. This will ensure that your order only executes if you get that price or better.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |