The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What happens when you buy a put option contract?” I want to talk about the logistics of what actually happens when you buy a put option contract and the first thing to understand is that when you are an option buyer in this case of a single put option, you do have to pay money to get into that contract. Logistically, what happens is that the money that you paid for the contract or the option premium gets transferred over to the option seller and in this case, if you're a put option seller, you would then receive that option premium or that option contract value as income in your account. Now, when this happens now, you have this put option contract that you’ve now purchased from the option seller and it’s in your account valued at the value that you priced it at and it's immediately going to start changing in value based on time until expiration, volatility, the underlying st