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It is easier to use an example than it would be to explain. Let's say you are short 1 XYZ June 100 put. In other words, you have given another investor the right to sell you 100 shares of XYZ stock at 100 dollars a share, no matter what price the stock is trading on the open market. If the stock is trading @ 105, no one would "put" the stock to you because they would be losing 5 dollars a share compared to selling at the current price.
Say XYZ stock splits 2 for 1. It goes from 105.00 a share to 52.50 and every share is now worth 2 shares. It would seem that putting the stock to you @ 100 dollars would now be a huge money maker, but it is not. The put also splits 2 for 1. You would then be short 2 June 50 puts, giving someone the right to put 200 shares @ 50 dollars a share into your hands.
The math is fairly simple in a 2 for 1. As you can see, if your put gets exercised against you in either instance, the stock is sold to you for 10,000 dollars total (100 shares @ 100 dollars per, or 200 shares @ 50 dollars per). It gets much more complicated if it is a 3 for 2 or other uneven split. In those instances, an entirely new option class is created and both are traded until all the "old" XYZ options have expired.
What else can I help you with?
Is there any difference if you buy a call or sell a put?
Yes, and it's massive. If you buy a call, the option exercises if the stock price is higher than the strike price. If this happens, you resell the stock and keep the profit. If you sell a put, the option exercises if the stock price is below the strike price. If this happens, you bury the stock in the back yard until the price goes back up.
What happens when you sell a put option?
When you sell a put option, you are agreeing to buy a specific stock at a predetermined price (the strike price) if the option buyer decides to exercise the option. In exchange for selling the put option, you receive a premium from the buyer.
How do you hedge short put option?
Sell the unerlying stock short.
What is the difference between a sell call and a buy put in options trading?
In options trading, a sell call is when an investor sells the right to buy a stock at a specific price, while a buy put is when an investor buys the right to sell a stock at a specific price.
What is the option to sell stock at a specified time in the future called?
A Put option
What is 'put' trading?
Put trading means trading put options. Put options are options that are derived from stocks and it allows you to always sell the stock at the strike price before expiration no matter what price the stock is in future. As such, put options are bought when you expect the underlying stock to go DOWN.
What is the purpose of an exercise put option without stock?
The purpose of an exercise put option without stock is to allow the holder to sell the option contract at a profit before it expires, without actually owning the underlying stock.
How do you take the stock stereo out of an 1995 civic?
pull it out and disconnect the harness. put a new harness on so when you sell it you can out your stock radio back in.
How can I short a stock using options?
To short a stock using options, you can buy a put option. This gives you the right to sell the stock at a specified price, allowing you to profit if the stock price decreases.
What does it mean to buy a put option in the stock market?
Buying a put option in the stock market gives the investor the right to sell a specific stock at a predetermined price within a certain time frame. This can be used as a way to profit from a decline in the stock's price.
How do you put money in the stock market or what is stock market?
Stock market is a term used to refer to any place where stocks are bought and sold. The physical place where the actual trade in stocks happens is called a stock exchange. In India, there are two main stock exchanges - Bombay Stock Exchange or the BSE and National Stock Exchange or the NSE. Traditionally, you or your broker had to be present on the floor of the exchange to buy or sell stocks. These days, however, people make use of online stock trading platforms for this purpose. Many companies offer online stock trading platforms where investors can buy and sell stocks.
What if your supervisor tells you to rotate the stock What does she want you to do?
Rotating stock is to sell the oldest stock first. You typically bring the older merchandise to the front and put the new stuff in behind.
