Trying to understand put options (with an example)
Trying to understand how all the terminology applies as well, so I've posted a screenshot of a practice put option.
So for example, SPY today at end of day was 266.55. If I were to buy a SPY Apr 09 260 put, as per the screenshot below, I just wanna see if I'm standing this all correctly.
- The strike price is 260
- The price of this particular PUT itself is 3.06
- I can sell this put at any point before end of market day on April 9th
- If I were to sell the put option when market price for example is $262, my profit would be 266.55 (price at time of put option purchase) -262 (current price) - 3.06 (price of each individual put option), multipled by the number of puts I bought?
- I can sell at any point (ie when SPY is 262, if it goes to 260 (strike price), if it even goes to 255, as long as I manually sell before expiry of contract? As Long as I do it before the expiry of the put, which is the end of market day on the 9th in this example?
- If I don't manually sell or close the position, if at the expiry of the put, the price is "out of the money" aka above $260, then the puts I purchases are worth zero? but if the price is below $260 or "in the money", then that results in a trade of the underlying stock if the option is exercised? (this part I'm confused with)
If someone could tell me whether all this is correct, or where I'm entirely wrong here, it would be much appreciated!
So for example, SPY today at end of day was 266.55. If I were to buy a SPY Apr 09 260 put, as per the screenshot below, I just wanna see if I'm standing this all correctly.
- The strike price is 260
- The price of this particular PUT itself is 3.06
- I can sell this put at any point before end of market day on April 9th
- If I were to sell the put option when market price for example is $262, my profit would be 266.55 (price at time of put option purchase) -262 (current price) - 3.06 (price of each individual put option), multipled by the number of puts I bought?
- I can sell at any point (ie when SPY is 262, if it goes to 260 (strike price), if it even goes to 255, as long as I manually sell before expiry of contract? As Long as I do it before the expiry of the put, which is the end of market day on the 9th in this example?
- If I don't manually sell or close the position, if at the expiry of the put, the price is "out of the money" aka above $260, then the puts I purchases are worth zero? but if the price is below $260 or "in the money", then that results in a trade of the underlying stock if the option is exercised? (this part I'm confused with)
If someone could tell me whether all this is correct, or where I'm entirely wrong here, it would be much appreciated!
