What Is A Put Option?

In the special language of options, contracts fall into two categories – Calls and Puts. A Call represents the right of the holder to buy stock. A Put represents the right of the holder to sell stock.

Put Options

A Put option is a contract that gives the buyer the right to sell 100 shares of an underlying stock at a predetermined price for a preset time period. The seller of a Put option is obligated to buy the underlying security if the Put buyer exercises his or her option to sell on or before the option expiration date. Likewise, an American-style WXYZ Corporation May 21, 2011 60 Put entitles the buyer to sell 100 shares of WXYZ Corp. common stock at $60 per share at any time prior to the option’s expiration date in May.

Here’s a great video run down by the guys over at Tasty Trade!

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