equity

chandniwadhwani92
Finance Junkie
Posts: 166
Joined: Mon Oct 06, 2014 7:36 am

equity

Postby chandniwadhwani92 » Sun Nov 02, 2014 6:40 pm

Put option on the shares benefits the shareholder because it effectively place a floor under share value.

What does it mean placing a floor value

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

equity

Postby edupristine » Mon Nov 03, 2014 9:25 am

One of the basic tool for establishing a minimum or floor price for your security is to buy a put option. Even if the price of the security falls below the strike price, you can always sell the security at the strike price.
Hence, effectively buying a put option places a floor value on the security, thus guaranteeing that you will get atleast the price equal to the strike price.


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