Buy To Open Put Example «DELUXE»

Imagine is currently trading at $100 per share . You believe the stock is overvalued and will drop soon due to an upcoming earnings report. Action: Buy to Open (BTO) Asset: 1 Put Option contract (represents 100 shares) Strike Price: $95 Expiration: 1 month from now Premium (Cost): $2.00 per share ($200 total) The Outcomes 1. The Bearish Win (Stock Drops)

Unlike shorting a stock, your maximum loss is strictly limited to the premium paid. Key Terms to Remember Premium: The "entry fee" you pay to the seller. buy to open put example

You wouldn't exercise your right to sell at $95 if you can sell on the open market for $110. Imagine is currently trading at $100 per share

The contract is now worth $1,500. After subtracting your initial $200 investment, your profit is $1,300 . 2. The Hedge (Stock Stagnates) The stock stays flat at $100 . The Bearish Win (Stock Drops) Unlike shorting a

Two weeks later, Company XYZ misses earnings and the stock price plunges to .