← BeginnerLesson 8 · 4:33
What does a put's graph tell you?
Summary
You can read a put's profit and loss graph and see your worst case, your break-even and your best case at a glance. You can find a put's break-even by taking the premium off the strike, and its best case by multiplying that by 100. You can explain why a put's gain has a top while a call's doesn't.
Key terms
- put graph
- break-even
- The stock price on the last day where you neither make nor lose money: strike plus premium for a call, strike minus premium for a put.
- maximum loss
- The most a trade can lose; for an option you buy, it is the premium you paid.
- maximum profit
- The most a trade can make; for a bought put it is the strike minus the premium, times 100, because a stock can't fall below zero.
Check yourself
Answer each question to see why the right answer is right.
1. What is the break-even for the put with a strike of $100, bought for $3.41 a share?
2. XYZ finishes at $98. What is your result on one contract of the $100 put bought for $341?
3. What is the most the $100 put bought for $341 can make?
4. Why does the put's line stop climbing on the left, unlike the call's line on the right?
5. XYZ simply stays at $100 until the last day. What happens to the $100 put bought for $341?
Finished the video and the quiz? .