: Buying a PUT OPTION in the Out Of The Money The scenario is this. The price of a XYZ stock is 0. I speculate that the stock price can go to 0 and then retreat to 0 in six months. Is it possible to buy a PUT OPTION

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Let me show you an example.

You said current price 0 but at 9 (we will use 0 strike because strike prices comes in increments) you want to buy a put when stock is at 0 and sell the put when the stock is at 0.

So fast forward....the stock is 0:

6 month put COST: .50 @ 200 strike (costs ,750 per contract)

(remember the strike price is where you exercise or collect your shares whether its a call/+shares or put/-shares.

By 6 months: stock is 0

Profit Formula: (strike price) - (current price) - (options cost) + (remaining time value)

Profit formula: 0-0 = - .50 = .50 profit + (-2 time value) (you can add -2 time value if you sold after 3 months and option has 3 months time value left)

Basically you put in ,750 it became ,000 and your profit is ,250 for a 128.5% profit (.50/.50).

Any questions?