To Open Put Example - Buy

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.

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 . buy to open put example

Strike Price minus Premium (In this example: $93). Since the market price is higher than your

If you hold until expiration, the option expires worthless, and you lose your $200 premium. 3. The "Wrong" Call (Stock Rises) The stock rallies to $110 . your profit is $1