You wouldn't exercise your right to sell at $95 if you can sell on the open market for $110.
Your maximum risk is capped. You simply lose the $200 you paid to open the position. Why Traders "Buy to Open" Puts buy to open put example
Imagine is currently trading at $100 per share . You believe the stock is overvalued and will drop soon due to an upcoming earnings report. Action: Buy to Open (BTO) Asset: 1 Put Option contract (represents 100 shares) Strike Price: $95 Expiration: 1 month from now Premium (Cost): $2.00 per share ($200 total) The Outcomes 1. The Bearish Win (Stock Drops) You wouldn't exercise your right to sell at