The contract is now worth $1,500. After subtracting your initial $200 investment, your profit is $1,300 . 2. The Hedge (Stock Stagnates) The stock stays flat at $100 .
Unlike shorting a stock, your maximum loss is strictly limited to the premium paid. Key Terms to Remember Premium: The "entry fee" you pay to the seller. buy to open put example
Two weeks later, Company XYZ misses earnings and the stock price plunges to . The contract is now worth $1,500