Options Made Easy: Your Guide to Profitable Trading, Second Edition

Risk Profile Charts for Put Options

Now that you know what long and short calls look like, let’s look at the risk profile of a put option.

We already know that a put option is the right to sell an asset. Logically, this suggests that the put option risk profile direction will be the opposite to that of calls or buying the asset itself. So let’s have a look at an example:

Chart 1.5. Long put option risk profile.

Look back to Example 1.4 where you buy a put option as follows:

Stock price	$77.00
Put premium	$5.58
Exercise Price	$80
Time till expiration	4 months

Remember that. . .

Buying Gives You the Right

• Buying a put option gives you the right, not ...