Options Strategies Explained
Buy a put
What are the basics?
Like stocks, options are financial securities that can be bought and sold. There are two types of options: calls and puts.
![Buy a put -1](https://courseimg.futunn.com/2023013100007234c777c1b9eff.gif?imageMogr2/quality/100/ignore-error/1/format/png)
Buy a put means you need to pay an amount (the premium) for a contract that gives you the right, not the obligation, to sell an asset (the underlying asset) at an agreed price (the strike price) on or before a specified date (the expiration date).
![Buy a put -2](https://courseimg.futunn.com/2023013100007235fc3a3293161.gif?imageMogr2/quality/100/ignore-error/1/format/png)
For example, you may purchase a $1,000 TUTU 202X-XX-XX put at $100 premium. In this case, you have the right to sell 100 shares of TUTU at $1,000 per share on or before 202X-XX-XX.
Why trade it ?
Put options' prices is likely to rise if its underlying stock falls
Generally, a put option and its underlying stock move in opposite directions. So if you're bearish on the stock, you may consider buying its puts.
![Buy a put -3](https://courseimg.futunn.com/2023020800007484a7617354169.gif?imageMogr2/quality/100/ignore-error/1/format/png)
Speculation
Options can provide leverage. This means if the underlying stock moves downward, the rise in its put price could be bigger; similarly, if the underlying stock goes up, the fall in its call price could be greater, too. So puts can be used for speculation.
![Buy a put -4](https://courseimg.futunn.com/20230208000074859e34c099517.gif?imageMogr2/quality/100/ignore-error/1/format/png)
Limited loss
The maximum potential loss for buying a put is the premium paid, while the maximum profit occurs when the stock price falls to 0. The max gain is the strike price * the number of shares covered - the cost of buying the put.
![Buy a put -5](https://courseimg.futunn.com/2023020800007486631cd003f76.gif?imageMogr2/quality/100/ignore-error/1/format/png)