All you want to know but never asked about the stocks and options markets.

domingo, 2 de noviembre de 2014

Strategies with options: Long Put, buying a Put option

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Buyers of a Put option seek to benefit from the price decreases of the underlying asset or protect long positions againts a possible drop in price. They have a bearish view of the market and expect that price volatility to increase.

The risk of this strategy is limited to the premium price paid by the trader at the beginning and profit potential is unlimited at maturity in a bear market.

The breakeven point in this trade, ie the point from which begins the potential for profit, is the strike price - the price of the premium. Furthermore, we note that its delta decreases to -1 as the underlying asset prices falls.