Long At-the-Money Put
A long put strategy gives the holder the right, but not the obligation to sell futures at a specific price for a specific period of time.
This position profits if prices decline. Profits are unlimited on the downside; total risk is limited to the premium paid. Increasing volatility favors this position, while the passage of time works against this trade. Hedgers can buy puts for unlimited downside protection, yet still participate in a rising market. This strategy is also known as a "floor."
Position Premium Dollar Premium Delta Buy one $20 crude oil put $1.17 $1,170 +.48 Maximum risk $1.17 per barrel $1,170 per contract Maximum profit Unlimited on the upside Break-even futures price $18.83 Position Premium Dollar Premium Delta Buy one $260 gold put $6.70 $670 -.50 Maximum risk $6.70 per ounce $670 per contract Maximum profit Unlimited on the upside Break-even futures price $253.30
THERE IS A RISK OF LOSS IN FUTURES TRADING AND IS NOT SUITABLE FOR
ALL INVESTORS. ONLY RISK CAPITAL SHOULD BE USED WHEN TRADING FUTURES.
Copyright 2008 Capitol Commodity Services, Inc. All Rights Reserved.
Education
- Futures Education
- Options Information
- Options Strategies
- Long At-the-Money Call
- Short Out-of-the-Money Call
- Covered Call
- Ratio Write
- Long Out-of-the-Money Call
- Long At-the-Money Put
- Short Out-of-the-Money Put
- Short Covered Put
- Bull Call Spread
- Bear Call Spread
- Bear Put Spread
- Bull Put Spread
- Long At-the-Money Straddle
- Long Strangle
- Short At-the-Money Straddle
- Short Strangle
- Call Ratio Backspread
- Put Ratio Backspread
- Synthetic Long Put
- Synthetic Long Call
- Synthetic Short Futures
- Synthetic Long Futures
- Fence
