Ramifications of Buying Option Puts

Purchasing an option put grants you the right but not the obligation to sell an underlying stock. When you buy a put option you are not obligated to sell anything, you only have the right to do so by the expiration date and at the strike price.

The price you pay for the option premium is the risk that you are undertaking. The rewards could be potentially unlimited. The more a stock falls, the more rewards you will pocket.


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