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Buying PUT


Guest FRC

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On 16/11/2019 at 00:16, FRC said:

Hi

I bought PUT options for $320 and the current price is showing $305.

Does that mean I am in profit or loss?

Hey @FRC- thanks for your feedback message.

I can see why this can be a little confusing. When buying a put you want the underlying market price to go down. However, the option is priced depending on how likely is to settle below the strike price. If it's very likely the option will be priced high, if it's not likely then the price of the option will be lower.

If the price at which you bought the put option is higher than what the put option sell price is at now it's not good for your position, it's more than likely that the underlying market price has increased. If you were to close the option out at $305 it means you would lose ($320 - $305) x size. 

If the underlying market price has moved down you should see that the option price normally moved up because it's more likely that at expiry the market price will settle below your strike price. 

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