This security gives investors the right to sell (or put) a fixed number of shares at a fixed price within a given period. An investor, for example, might wish to have the right to sell shares of a stock at a certain price by a certain time in order to protect, or hedge, an existing investment. Put Option. An option contract in which the holder has the right but not the obligation to sell some underlying asset at an agreed-upon price on or before the expiration date of the contract, regardless of the prevailing market price of the underlying asset.
One buys a put option if one believes ij price for the underlying asset will fall by the end of the contract. If the price does fall, the holder may buy and resell the underlying asset for a profit. Put options may be used on thePuttable bond (put bond, putable or retractable bond) is a bond with an embedded put option. The holder of the puttable bond has the right, but not the obligation, to demand optiom repayment of the principal.
Therefore, investors sell bonds back to the issuer and may lend proceeds elsewhere at a higher rate. Bondholders are ready to pay for such protection by accepting a lower yield relative to that of a straight bond.Of course, if an issuer has a severe liquidity crisis, it may be incapable of paying for the bonds when the investors wish. The repurchase price is set at the time of issue, and is usually par value. Of course, the special advantages of put bonds mean that some yield must be sacrificed.This type of bond is also known as a multimaturity bond, an option tender bond, a variable rate demand obligation (VRDO).
This article includes a list of references, monej its sources remain unclear because it has insufficient inline citations. Please help to improve this article by introducing more precise citations. (April 2009) ( Learn how and when to remove this template message)In finance, moneyness is the relative position of the current price (or future price) of an underlying thf (e.g., a stock) with respect to the strike price of a derivative, most commonly a call option or a put option.
Moneyness is firstly a three-fold classification: if the derivative would make money if it were to expire today, it is said to be in the money, while if it would not make money it is said to be out of the money, and if the current price and strike price are equal, it is said to be at the money. There are two slightly different definitions, according to whether one uses the current price (spot) or future price (forwstock option - the right to buy or sell a stock at a specified price within a stated period2.put option - the option to sell a given stock (or stock index or commodity future) at a given price before a given date.
Being puttablr the money does not mean you puttable option in the money profit, it just means the option is worth exercising. This is because the option costs money to buy.