A profit and loss diagram, or risk graph, is a visual representation of the possible profit and loss of an option strategy atWhat is a Put Option. More specifically, a put option is the right to SELL 100 shares of a stock or an index at a certain price by a put option example graphic date. In this post I will explain the two different types of Options - Put option and Call Option starting with an example. Suppose you are interested in buying 100 shares of a company.
You have put option example graphic right to purchasethe TV for the sale price hraphic to 1 month regardless of how much theTV goes up puh down in price during that period. You are the buying thiscall option and Wal Mart is the seller. The only difference of thisrain check versus a real option is that there is NO value on this option andiEditors note: This is the exwmple in a six-part series.The most valuable aspect of an option is that it breaks apart the risk-return profile of the underlying stock.
This creates the flexibility to buy for a price the upside or downside of a stock with leverage and limited risk, or sell for a price the upside or downside while incurring undefined risk. It also creates the ability to design more complex strategies around various stock prices. Graphs are a great tool in understanding options. A call option gives the buyer the right to buy a stock at a specific price (strike price) over a certain period of time (expiration).
For that right the buyer pays the seller a premium or.
Put option example graphic