Buy To Open | Put Example

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.

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. 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. If you already own 100 shares of XYZ,

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 Unlike shorting a stock, your maximum loss is