If you hold until expiration, the option expires worthless, and you lose your $200 premium. 3. The "Wrong" Call (Stock Rises) The stock rallies to $110 .
Your maximum risk is capped. You simply lose the $200 you paid to open the position. Why Traders "Buy to Open" Puts buy to open put example
Your right to sell at $95 is now very valuable. The option is worth at least $15 per share ($95 strike - $80 market price). If you hold until expiration, the option expires
Since the market price is higher than your $95 strike price, the option is "out of the money." As expiration approaches, the "time value" of the option decays. Your maximum risk is capped
A "Buy to Open" (BTO) put order is the classic way to bet against a stock or hedge a position you already own. When you execute this trade, you are paying a premium to acquire the a specific stock at a set price. The Scenario