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| − | A put option gives the buyer of the option the right to sell the underlying asset at a fixed price at any time prior to the expiration date
| + | Put options |
| − | of the option. The buyer pays a price for this right.
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| − | | |
| − | At expiration,
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| − | * If the value of the underlying asset (S) < Strike Price(K)
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| − | ** -> Buyer makes the difference: K-S
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| − | * If the value of the underlying asset (S) > Strike Price (K)
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| − | ** -> Buyer does not exercise
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| − | | |
| − | More generally,
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| − | * The value of a put decreases as the value of the underlying asset increases
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| − | * The value of a put increases as the value of the underlying asset decreases
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| − | A [[Pay-off Diagram|Pay-off Diagram]] for a '''buyer''' of put option looks like this: you start out with a loss and gain profit if the actual share price becomes lower than the strikeprice. Buying a put option buys you protection against lower stock prices.
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| − | <html>
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| − | <div id="jxgbox3" class="jxgbox" style="height:300px; width:400px;"></div>
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| − | </html>javascript:;
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| − | <script>
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| − | var board = JXG.JSXGraph.initBoard('jxgbox3', {boundingbox: [-40, 150, 300, -150], keepaspectratio:true, axis:true});
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| − | var strikepriceslider = board.create('slider', [[0,0],[300,0], [0.0,100, 300]], {name:'strikeprice'}, {withLabel: false});
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| − | var putpriceslider = board.create('slider', [[0,0],[0,-300], [0.0,-100, -300]], {name:'callprice write'}, {withLabel: false});
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| − | var strikepriceline= board.create('line', [[function(){return strikepriceslider.X()}, function(){return -150}],[function(){return strikepriceslider.X()},function (){return 200}]],{'strokeColor':'red', 'dash':'true'});
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| − | | |
| − | var writingputoptionarrow1 = board.create('arrow', [[function(){return strikepriceslider.X()+200}, function(){return putpriceslider.Y()}],[function(){return strikepriceslider.X()},function (){return putpriceslider.Y()}]],{'strokeColor':'yellow'});
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| − | var writingoptionarrow2 = board.create('arrow', [[function(){return strikepriceslider.X()}, function(){return putpriceslider.Y()}],[function(){return strikepriceslider.X()-200},function (){return putpriceslider.Y()+200}]],{'strokeColor':'yellow'});
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| − | | |
| − | </script>
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| − | | |
| − | A [[Pay-off Diagram]] for a ''seller'' of put option ('writing' a put') looks like this. In the interactive diagram below, the purple line represents the put for the seller:
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| − | | |
| − | <html>
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| − | <div id="jxgbox4" class="jxgbox" style="height:300px; width:400px;"></div>
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| − | </html>
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| − | | |
| − | <html>
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| − | <script type="text/javascript"charset="UTF-8"src="https://cdn.jsdelivr.net/npm/jsxgraph@1.1.0/distrib/jsxgraphcore.js">
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| − | </script>
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| − | <link rel="stylesheet"type="text/css"href="https://cdn.jsdelivr.net/npm/jsxgraph@1.1.0/distrib/jsxgraph.cs"/>
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| − | </html>
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| − | <html>
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| − | <script>
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| − | var board = JXG.JSXGraph.initBoard('jxgbox4', {boundingbox: [-40, 150, 300, -150], keepaspectratio:true, axis:true});
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| − | var strikepriceslider = board.create('slider', [[0,0],[300,0], [0.0,100, 300]], {name:'strikeprice'}, {withLabel: false});
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| − | var writeputpriceslider = board.create('slider', [[0,0],[0,300], [0.0,100, 300]], {name:'callprice write'}, {withLabel: false});
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| − | var strikepriceline= board.create('line', [[function(){return strikepriceslider.X()}, function(){return -150}],[function(){return strikepriceslider.X()},function (){return 200}]],{'strokeColor':'red', 'dash':'true'});
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| − | var putoptionarrow1 = board.create('arrow', [[function(){return strikepriceslider.X()+200}, function(){return writeputpriceslider.Y()}],[function(){return strikepriceslider.X()},function (){return writeputpriceslider.Y()}]],{'strokeColor':'purple'});
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| − | var putoptionarrow2 = board.create('arrow', [[function(){return strikepriceslider.X()}, function(){return writeputpriceslider.Y()}],[function(){return strikepriceslider.X()-200},function (){return writeputpriceslider.Y()-200}]],{'strokeColor':'purple'});
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| − | | |
| − | </script>
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| − | </html>
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| − | | |
| − | See also: [[Call options|Call options]]
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| | [[Category:finance]] | | [[Category:finance]] |
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