# Calculating the value of a put option, Out of the money put option example

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Add, Subtract, Multiply, Divide What is the value of a call or put option? A Call option represents the right but not the requirement to purchase a set number of shares of stock at a pre-determined 'strike price' before the option reaches its expiration date.

A call option is purchased in hopes that the underlying stock price will rise well above the strike price, at which point you may choose to exercise the option. Exercising a call option is the financial equivalent of simultaneously purchasing the shares at the strike price and immediately selling them at the now higher market price. A Put option represents the right but not the requirement to sell a set number of shares of stock which you do not yet own at a pre-determined 'strike price' before the option reaches its expiration date.

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A put option is purchased in hopes that the underlying stock price will drop well below the strike price, at which point you may choose to exercise the option. It is based on information and assumptions provided by you regarding your goals, expectations and financial situation.

The calculations do not infer that the company assumes any fiduciary duties. The calculations provided should not be construed as financial, legal or tax advice.

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Hypothetical illustrations may provide historical or current performance information. Past performance does not guarantee nor indicate future results.