Options trading beginner question

THEMAKKER13 said:

Hello, I'm just getting into options trading. I am of the opinion that we are going to enter a bear market, and am looking to purchase put options for stocks. However, I'm confused as to the meaning of the options table. There's a stock that I'm looking at that currently trades for about $38/share; yet there are put options available with a strike price of 60. Wouldn't this mean that I could purchase the stock for $38/share, and then immediately sell it for $60/share? Surely this can't be correct, so my question is, what am I missing?
Thanks for any help.

Click to expand...

options-george said:

$60 put options give you the right to sell the stock at $60.

If the stock is currently trading $38, then the put option would be worth at least $22/share (i.e. the intrinsic value) plus there would also be time value option - depending on the option's expiration date.

So yes you could buy a put and immediately exercise it, but the profit from the exercise would be less than what you would have paid for the option (well actually a loss, because of time value and transaction costs).

Click to expand...

THEMAKKER13 said:

Thanks for the clarification George.

Click to expand...