Put Option
Last updated
Last updated
Payoff Diagram:
Direction Assumption: Bearish
Maximum Profit: Unlimited
Maximum Loss: Limited to Premium paid
Breakeven Price: Strike Price - Premium paid
Theta: Passage of Time -> Negative Effect The time value of the Long Put's premium, which the holder has "purchased" by paying for the option, generally decreases or decays with the passage of time. Theta decrease accelerates as the option contract approaches expiration.
Volatility: If Volatility increases -> Positive Effect. If Volatility decreases -> Negative Effect.
Payoff Diagram:
Direction Assumption: Bullish
Maximum Profit: Limited to Premium received
Maximum Loss: Unlimited
Breakeven Price: Strike Price - Premium received
Theta: Passage of Time -> Positive Effect The time value of the Short Put's premium, which the option seller has "collected" by selling the option, generally decreases or decays with the passage of time. Theta decrease accelerates as the option contract approaches expiration.
Volatility: If Volatility increases -> Negative Effect. If Volatility decreases -> Positive Effect.