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

Plan that provides protection in the event of legal actions resulting from charges of harassment, discrimination, wrongful termination of employment, defamation, and invasion of privacy. ...

Program through which employees purchase individual life insurance and disability income insurance by having the employer reduce their income by the required insurance premium. Since the ...

Difference between the rent paid by a lessee as fixed by a lease prior to destruction of property and the rent received by the lessor after that property has been restored. ...

Protection under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of ...

Insurance company whose domicile is in a state other than the one in which the company is writing business. ...

Process of calculating a premium so that it is adequate-sufficient to pay losses according to expected frequency and severity, thereby safeguarding against the insurance company becoming ...

Coverage for goods during shipment on a common carrier. ...

Authority derived from an agent's contract with an insurance company. ...

Record a debit (or other) agent makes for premiums collected, time period for which the policy is paid, and the week of collection or date the premium was paid. In essence, the debit agent, ...

Popular Insurance Questions