Naked Put: The writer of a put option contract who is not short the underlying security.
Narrow Range Day: A trading day with a smaller price range relative to the previous day's price range.
If a stock is priced at $30, you buy a put option contract with a strike price of $29 for $1, and the stock falls to $25, you would be able to sell your put option contract for about $4. That would mean you just made 300% profit on your investment.
A riskless hedge would result from owning a ratio of two-thirds (66%) a position in stock (i.e., 66 shares) to every one long position in a put option contract. If the stock price goes up one point, then the stock position will increase $66.00.
(Nasdaq: YHOO ) , currently trading at $13, you could buy 10 put option contracts (each contract represents 100 shares of stock) to insure your entire position against further decline.
The possible payoff for a holder of a put option contract is illustrated by the following diagram:
Put Option ...
In-The-Money is When it is profitable to exercise the option. For example: Stock price is lower than the strike price specified in the put option contract.
Next Term:
Income Statement ...
 See also: Strike Price, Contract, Option, Put Option, Profit
  
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