Option (finance)

Ever wondered how investors protect against stock market dips?

Imagine you're worried about your favorite tech stock dropping soon after buying it.

Investors use a put option to sell their stock at today's price if it falls, safeguarding their investment.

Example

If you bought the stock at 100 and expect it to drop, a put option lets you sell it at 100 even if it's now worth $80.

Remember this

A put option is like insurance for your stock investment.

Text adapted from Wikipedia, licensed under CC BY-SA 4.0.

Related concepts

the Black-Scholes formula prices

Black–Scholes equation governs derivative prices

Black–Scholes model

How can you predict the price of an option?

Graham number

Why pay too much for a stock?

implied volatility tells you

Implied volatility (IV) = option price / Black–Scholes model

Short (finance)

Short selling involves borrowing shares to sell, hoping to buy back cheaper

Price of oil

Ever worried about rising gas prices?

Educational content, not financial advice.

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