Long put short put. Hello,. To answer your 2 questions. 1. Both call option and put option are to limit the loss, the profit may be very much. Not exactly they are options if you buy them your losses are limited to the premium you paid. A bit like a car insurance you know what you pay (what you lose every year) if your car get stolen you are.

Long put short put

Short Put Option Strategy

Long put short put. A short put spread, or bull put spread, is an advanced vertical spread strategy with an obligation to buy and a right to sell at two different strike prices.

Long put short put


A long put is an options strategy in which a put option is purchased as a speculative play on a downturn in the price of the underlying equity or index. In a long put trade, a put option is purchased on the open exchange with the hope that the underlying stock falls in price, thereby increasing the value of the options, which are "held long" in the portfolio. A long put option could also be used to hedge a long stock position. A long put is a favorable strategy for bearish investors, rather than selling short stock.

A short stock position theoretically has unlimited risk since the stock price has no capped upside. A long put option is similar to a short stock position because the profit potentials are limited.

In the case of a short stock position, the investor's maximum profit is equivalent to the initial sale price. However, the maximum profit of a long put option is equivalent to the strike price less the premium paid for the put option. The long put strategy represents an alternative to simply selling a stock short, then buying it back at a profit if the stock falls in price. Options can be favored over shorting due to increased liquidity , especially for stocks with smaller floats, or due to increased leverage and a capped maximum loss, since the investor cannot lose more than the premiums paid.

The maximum profit is also capped and equivalent to the strike price less the premium paid for the put option. A long put option could also be used to hedge against unfavorable moves in a long stock position. This hedging strategy is known as a protective put, or married put. For example, assume an investor is long shares of hypothetical conglomerate EFF Corp. The investor is bullish on the stock, but fears that the stock may fall over the next month. Conversely, if the investor was bearish over the short term and did not own shares of the company, the investor could have purchased a put option on EFF Corp.

Dictionary Term Of The Day. A conflict of interest inherent in any relationship where one party is expected to Broker Reviews Find the best broker for your trading or investing needs See Reviews. Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education.

A celebration of the most influential advisors and their contributions to critical conversations on finance. Become a day trader. What is a 'Long Put' A long put is an options strategy in which a put option is purchased as a speculative play on a downturn in the price of the underlying equity or index. If the option is exercised early or expires "in the money," the option holder would be short the underlying asset.

The options can either be sold prior to expiration for a profit or loss, or held to expiration, at which time the investor must purchase the stock at market prices , then sell the stock at the stated exercise price.

Long Put Strategy vs. Shorting Stock A long put is a favorable strategy for bearish investors, rather than selling short stock. Long Put Options to Hedge A long put option could also be used to hedge against unfavorable moves in a long stock position.

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