The cost you pay to buy the option; this is also your maximum potential loss.
A is a financial contract that gives the buyer the right, but not the obligation , to sell an underlying asset (like 100 shares of a stock) at a predetermined price, known as the strike price . what is buy put option
Imagine stock XYZ is trading at $100. You believe it will drop soon. The cost you pay to buy the option;
The stock stays at $100 or rises. You choose not to exercise the option, and your loss is capped at the $300 premium . The Break-Even Point You believe it will drop soon
The set price at which you can sell the stock, regardless of its current market value.
When you buy a put, you are essentially betting that the stock price will fall below the strike price before the expiration date. Example: Speculating on a Drop
You buy one $95 strike put option for a $3 premium. Cost: Total cost is $300 ($3 premium × 100 shares).