Definition of "Put option"

Right to sell a given security at a stipulated price until a future expiration date. For example, assume the "None-Do-Well" company's stock has a market value of $20. Investor A sells Investor B an option (right) to buy Investor A's shares in the "None-Do-Well" company at a price of $25, good until 60 days hence. Investor B pays a premium of $4 per share for this right. If the stock's market value increases to a price greater than $29, Investor B will make a profit on the transaction. If, however, the stock falls below its original price of $20, Investor A will keep the stock as well as the $4 premium right per share it received from Investor B. If the 60-day limit expires without the right being executed, the option becomes void and worthless.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

Insurance policy under which the value equals the benefits to be paid to the plan participants (employees) at normal retirement age, assuming that (1) their rate of earnings remains the ...

Obligations of shipowners for water polluted by spills from their ships. If a ship discharges oil or other polluting or hazardous substances into the water, the shipowner is responsible ...

Method of operation. ...

Rate not subsequently adjusted. The rate stays in effect regardless of an insured's subsequent loss record. ...

In homeowners insurance, usually an 80% coinsurance requirement, which means the insured must carry insurance on the value of a home on a replacement cost basis of at least 80%. For ...

Same as term Coverage: protection under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and ...

Attachment to a general liability policy thereby eliminating the exclusion of property under the care, custody, and/or control of an insured. Without this endorsement there would be no ...

Same as term Direct Response Marketing: method of selling insurance directly to insureds through a companies own employees, through the mail, or at airport booths. The company uses this ...

Person who is expressly or by implication asked to visit property in the possession, care, or control of another person. The inviter has the obligation to render his or her property safe ...

Popular Insurance Questions