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Put options allow the owner to sell the underlying stock at a specified price until a specific date. When the stock price goes down, the put option increases in value, all else equal.
The following guidelines determine whether and when to exercise an option: [3] An option should only be exercised if it is in the money by at least as much as the fees associated with the underlying transaction (e.g. the fee for subsequently selling an underlying which has been physically delivered). The exercise usually costs money as well.
Generally, investors who buy put options expect the actual price of the stock on the market to be lower than their options price so that they maintain the right to sell at above market value. Call ...
Call options are contracts to buy a stock, while put options are contracts to sell. A trader can begin the options trade by either buying — “going long” — or selling — “going short.”
If the underlying stock's market price is below the option's strike price when expiration arrives, the option owner (buyer) can exercise the put option, forcing the writer to buy the underlying stock at the strike price. That allows the exerciser (buyer) to profit from the difference between the stock's market price and the option's strike price.
The holder of an American-style call option can sell the option holding at any time until the expiration date and would consider doing so when the stock's spot price is above the exercise price, especially if the holder expects the price of the option to drop. By selling the option early in that situation, the trader can realise an immediate ...
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