Long put - speculative

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All information you provide will be used by Fidelity solely for the purpose of sending the email on your behalf. The subject line of the email you send will be "Fidelity. Options are a flexible investment tool that can help you take advantage of any market condition. With the ability to buy put option fidelity income, help limit risk or take advantage of your bullish or bearish forecast, options can help you achieve your investment goals.

Apply to Trade Options If you have questions about trading options, call Whether you are new to options or an experienced trader, Fidelity has the tools, expertise, and educational support to help improve your options trading. And with powerful research and idea generation at your fingertips, we can help you trade in the know. See how our pricing compares. Plus, get potential additional savings with Fidelity's price improvement.

Be the first to know: And visit our Learning Center for helpful videos and webinars, or buy put option fidelity our Strategy Desk Specialist anytime with questions. Our independent research and buy put option fidelity help you scan the markets for opportunities.

Help improve your trades, from idea to execution. No matter where you trade or how you trade, we offer sophisticated options trading platforms to suit your needs at home, or on the go. With the ability to leverage and hedge, options can help limit risk, while offering unlimited profit potential. Learn how to start trading options today. Other conditions may apply. Employee equity compensation buy put option fidelity and accounts managed by advisors or intermediaries through Fidelity Clearing and Custody Solutions are subject to different commission schedules.

Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read Characteristics and Risks of Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request. There are additional costs associated with option strategies that call for multiple purchases and sales of options, such as spreads, straddles, and collars, as compared with a single option trade.

The fee is subject to change. The comparison is based on an analysis of price statistics that include market orders and marketable limit orders of shares for the share industry comparison and —1, shares for the 1, share industry comparison. Price improvement examples are based on averages, and any price improvement amounts related to your trades will depend on the particulars of your specific trade. Fidelity's average retail order sizes for SEC Rule eligible orders —1, shares and —9, shares during this time period were and shares, respectively.

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Your email address Please enter a valid email address. Best-in-class strategy and support Whether you are new to options or an experienced trader, Fidelity has the tools, expertise, and educational support to help improve your options trading.

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Important legal information about the email you will be sending. By using this service, you agree to input your real email address and only send it to people you know.

It is a violation of law in some jurisdictions to falsely identify yourself in an email. All information you provide will be used by Fidelity solely for the purpose of sending the email on your behalf. The subject line of the email you send will be "Fidelity. In return for paying a premium, the buyer of a put gets the right not the obligation to sell the underlying instrument at the strike price at any time until the expiration date.

Speculators who buy puts hope that the price of the put will rise as the price of the underlying falls. Since stock options in the U. However, speculators typically do not want to have a short position in the underlying shares, so puts that are purchased to speculate are usually sold before the expiration date.

The maximum potential profit is equal to the strike price of the put minus the price of the put, because the price of the underlying can fall to zero. Risk is limited to the premium paid plus commissions, and a loss of this amount is realized if the put is held to expiration and expires worthless. Buying a put to speculate requires a 2-part bearish forecast. The forecast must predict 1 that the stock price will fall so the put increases in price and 2 that the stock price decline will occur before option expiration.

Buying a put to speculate on a predicted stock price decline involves limited risk and two decisions. The maximum risk is the cost of the put plus commissions, but the realized loss can be smaller if the put is sold prior to expiration.

The first decision is when to buy a put, because puts decline in price when the stock price remains constant or rises. The second decision is when to sell, because unrealized gains can disappear if the stock price reverses course and rises. Many investors who buy puts to speculate have a target price for the stock or for the put, and they sell the put when the target is reached or when, in their estimation, the target price will not be reached.

Put prices, generally, do not change dollar-for-dollar with changes in the price of the underlying stock. Rather, puts change in price based on their "delta. Volatility is a measure of how much a stock price fluctuates in percentage terms, and volatility is a factor in option prices.

As volatility rises, option prices tend to rise if other factors such as stock price and time to expiration remain constant. As a result, long put positions benefit from rising volatility and are hurt by decreasing volatility. This is known as time erosion.

Long puts are hurt by passing time if other factors remain constant. The owner of a put has control over when a put is exercised, so there is no risk of early assignment. If a put is exercised, then stock is sold at the strike price of the put.

If there is no offsetting long or owned stock position, then a short stock position is created. Therefore, if a speculator wants to avoid having a short stock position when a put is in the money, the put must be sold prior to expiration. When puts are purchased to speculate, it is assumed that the investor does not want to have a short stock position.

In many cases, in fact, there is not sufficient equity in the account to cover the margin requirement for a short stock position. Therefore, it is generally necessary for speculators to watch a long put position and to sell the put if the target price is reached or if the put is in the money as expiration approaches. A protective put position is created by buying or owning stock and buying put options on a share-for-share basis.

In return for receiving the premium, the seller of a put assumes the obligation of buying the underlying instrument at the strike price at any time until the expiration date. Reprinted with permission from CBOE. The statements and opinions expressed in this article are those of the author.

Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data. Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk.

Before trading options, please read Characteristics and Risks of Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request. Charts, screenshots, company stock symbols and examples contained in this module are for illustrative purposes only. Skip to Main Content. Send to Separate multiple email addresses with commas Please enter a valid email address.

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