Put option is a new way to earn

People who have free cash are eager to invest them. In this respect, the western financial markets have outstripped the domestic ones much more. In our country more than 70 years, interesting tools for profit-making, quite simply, were absent. European, American, Asian markets by the 70-80's. The 20th century already exhausted a variety of games in the securities segment, which led to the emergence of derivatives - derivatives.

Today, derivative securities, including put and call options, are defined as securities for the price of something (goods, securities, indices, interest rates, etc.). Or as a non-documentary right that appears in the holder in connection with the price change of an asset that is at the bottom of the derivative.

These tools in the late 90s of the 20th century so "inflated" the stock markets in various countries, which resulted in economic upheavals, stock crashes and instability of the 1997 banking system in the Asian financial market.

Let us consider in more detail what the put and call option is. In general, an option is a contract that gives a right (not mandatory) at a certain time to buy or sell the asset that underlies the contract. For the acquisition of such a right, you must pay a premium (i), which is a small part of the total cost. The price of future purchase (sale) (p) is established in the contract and is not subject to change.

Contacts of this type are divided into put and call options (from English "put" and "call"). The first option gives the right to sell the asset, and the second - to buy. If the price of the asset that was established at the time of the performance of the contract is not acceptable to the holders, the contract is not executed, because, we emphasize, the option confirms only the right, and not the obligation. Thanks to such tools, investors can benefit from changes in the prices of goods, shares, etc., without owning it in fact, that is why derivatives have become so widespread.

The put option (call) can be American (executed at any time before the end of the contract) or European (it is executed only on the date of performance of the contract). From another derivative instrument - futures - the option is different in that if the contract is executed, the underlying asset is necessarily delivered.

The potential return of those who buy the put option is calculated as the price specified in the contract (p), less the price of the asset on the market on the day of execution (h) and premium (i). A positive outcome of the transaction is possible, if only h

For example, you buy a put option for shares with a strike price of 60 rubles. in 3 months. Plus pay a premium, say, 5 rubles. It is assumed that the prices by that time will go down to 50 rubles. At the time of execution of the contract, you buy shares at this price, sell them at the option and get a profit = 70 - 60 - 5 = 5 rubles from the stock.

Summing up, we can say that the option is really a tool that allows you to make a profit with minimal losses in the form of premiums.