Buy To Open Put Example May 2026

Two weeks later, Company XYZ misses earnings and the stock price plunges to .

If you already own 100 shares of XYZ, buying this put acts as an insurance policy. No matter how low the stock falls, you are guaranteed the ability to sell at $95.

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. buy to open put example

The contract is now worth $1,500. After subtracting your initial $200 investment, your profit is $1,300 . 2. The Hedge (Stock Stagnates) The stock stays flat at $100 .

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

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.

To profit from a downward move without actually shorting the stock (which carries infinite risk). Unlike shorting a stock, your maximum loss is

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