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Understanding profit calculations when buying PUT
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Created: by SunBlaster Attachments:0

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Understanding profit calculations when buying PUT

  #1 (permalink)
Trading Apprentice
Vancouver, BC
 
Futures Experience: None
Platform: none
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Posts: 2 since Jan 2015
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Understanding profit calculations when buying PUT

Hey Folks,

I am super new to options, and trading in general, I have a question on profit calculations when buying a PUT. I am using optionsprofitcalculator.com (not trying promote, hope it's ok to post). I am buying a put option on NFLX at $150 strike price @ $.017 expiring on March 20, 2015. Now I understand I make profit if the stock price falls below my strike price of $150 however the calculator I am using says that I can make a profit above my strike price, this is where I get confused, why does it show profit above strike price?

In my example I am using the following:

Option Buy Long put @ 20th Mar $150.00
Price per option:$0.17
Contracts:# 1 x 100
Total cost:$17

Expiry:2015-03-20
Strike price:$150.00
IV (implied volatility): 73.438


Here is one example from the calculation:

Detail: $325 on 8th Jan 2015
Trades to close position No. Price Total
sell 20th Mar $150.00 Put 1x100 $0.21 $21.00
Initial outlay $-17.00
Total: $4.00


Any input is welcomed

SunBlaster


Last edited by SunBlaster; January 8th, 2015 at 07:52 PM.
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  #2 (permalink)
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  #3 (permalink)
Trading Apprentice
Vancouver, BC
 
Futures Experience: None
Platform: none
Favorite Futures: none
 
Posts: 2 since Jan 2015
Thanks: 0 given, 0 received


I think I've answered my own question, if I own a PUT options as stock price goes down over time my options appriciate hence I could resell them for profit . I don't necessary have to exerciser my options even if they are in the money, I could resell them

I am pretty sure I am right on this?

Thanks for looking

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