The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question – “What happens when you buy a put option?” When you buy a put option contract, you are exchanging the money that you paid for the put option contract in exchange for the right, but not the obligation to sell stock in the future at the strike price that you determined. With a put option contract, you give somebody else money or capital and that other person is the put option seller and in exchange, you are buying a right from them. They have an obligation now to deliver the stock to you, to purchase stock from you and you have a right to sell stock to them at a predetermined strike price in the future and that's pretty much all that happens. Whenever you get into these long put option contracts now, you have the choice of whether you want to exercise your right or not. You can basically transfer your risk by getting out of the contract or removing the contract, buying it back o