Buy To Open Put Example -

Unlike shorting a stock, your maximum loss is strictly limited to the premium paid. Key Terms to Remember Premium: The "entry fee" you pay to the seller.

You wouldn't exercise your right to sell at $95 if you can sell on the open market for $110. buy to open put example

Strike Price minus Premium (In this example: $93). Unlike shorting a stock, your maximum loss is

Two weeks later, Company XYZ misses earnings and the stock price plunges to . Strike Price minus Premium (In this example: $93)

A "Buy to Open" (BTO) put order is the classic way to bet against a stock or hedge a position you already own. When you execute this trade, you are paying a premium to acquire the a specific stock at a set price. The Scenario

Since the market price is higher than your $95 strike price, the option is "out of the money." As expiration approaches, the "time value" of the option decays.