The "Pit" is a term used to describe the trading floor of an exchange, where traders buy and sell securities. The floor is typically divided into sections, each of which is devoted to trading a particular type of security. For example, there might be a section for stocks, a section for bonds, and a section for options. How do you sell a put option? When you sell a put option, you are selling the right, but not the obligation, to someone else to sell you a stock at a specified price within a specified timeframe. The person buying the put option from you is called the option holder.
The price at which you agree to sell the stock to the option holder is called the strike price, and the specified timeframe is called the expiration date.
If, at the expiration date, the stock price is below the strike price, the option holder can exercise their option and force you to buy the stock from them at the strike price. If the stock price is above the strike price, the option holder will not exercise their option and you will keep the option premium that they paid to you. How are traders paid? Traders are typically paid a salary plus bonuses and/or commissions. The salary component is usually a base amount plus a percentage of profits. The bonus component is typically a percentage of profits, and may also be based on the trader's performance relative to other traders in the firm. The commission component is typically a percentage of the value of the trades that the trader makes.
What is a good put call ratio?
A put call ratio is simply the number of put options traded divided by the number of call options traded.
A put option is a contract that gives the holder the right, but not the obligation, to sell a security at a specified price within a certain time frame.
A call option is a contract that gives the holder the right, but not the obligation, to buy a security at a specified price within a certain time frame.
The put call ratio can be used as a contrarian indicator. When the ratio is high, it means that more put options are being traded than call options, which indicates that investors are bearish on the market. Conversely, when the ratio is low, it means that more call options are being traded than put options, which indicates that investors are bullish on the market.
There is no one "good" put call ratio, as it depends on the investor's outlook and market conditions. However, a ratio above 1.0 is generally considered to be bearish, while a ratio below 1.0 is generally considered to be bullish.
What happens when put expires?
When an options contract expires, the holder of the contract may no longer exercise their option. For example, if you have a call option and the stock price is below the strike price at expiration, you will not be able to exercise your option and purchase the stock. The same is true for put options; if the stock price is above the strike price at expiration, you will not be able to sell the stock.
Do trading pits still exist?
Yes, trading pits do still exist. However, they are not as prevalent as they once were. In the past, trading pits were the primary venue for trading commodities and futures contracts. Today, electronic trading has become the dominant way that these markets are traded.