Quote:
Originally Posted by Munson
I'm still trying to understand how options work, so let me ask this:
Let's say I buy 1 put contract today at $X amount of dollars, at a strike price of $360 for 4/26/19. And on that day, let's say the stock price ends up at $370.
Would I only lose the amount I invested ($X), or would I lose more than that?
Would I be forced to buy the 100 shares since my bet went the wrong way?
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You would be out the cost of the contracts. So I buy 20 BA puts with a strike of 360 for 2.77, I am in for 20x100x2.77 or 5,540. if the stock doesn't go below the strike, I am out that cost. If it goes to 350, I have the right to sell 20x100 shares of BA at 360. Which would net 20x100x(360-350) or 20000 minus 5,540. I would likely sell the options to close the position rather than exercise them, however.