Debt Management and Leverage

Option contracts

Put options

A Put Option is the opposite of a Call Option.

It is a contract that gives you right to sell a particular asset at a particular price within or at a specific time.

The asset, strike price and expiry are specified up front in the contract.

Put options are sometimes used to protect share portfolios when you may think that the prices are becoming too expensive and may subsequently fall in value.

This type of option effectively locks in a future sale price.

Let’s look at an example of Company B Ltd shares falling from $11 to $6.