Is Investopedia wrong on put options?

Coffee
1

I’m learning about put options, just for the sake of it for now.
I might try it to buy VT just for fun. So right now I’m a noob. Expect to see another post soon-ish with proper questions.

Right now I see this on google:

Screenshot from 2024-03-14 21-18-06
Screenshot from 2024-03-14 21-18-06975×707 108 KB

So. What I know:

  1. Put options: the right to sell at a price, if you buy one.
  2. Selling put options. The right to buy at a price.

So if I read the screenshot above, the first highlighted sentence is wrong. I can BUY the options. It seems like the answer is given to the wrong question. It should be “What happens if I buy a Put option…?”

Is my english getting worst or what?

2

Yes, there is a typo. You can excercise the option if you are the owner → if you buy it.

If you sell you may get exercised.

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3

What could be is that they are both correct BUT what is confusing is that the first paragraph starts with you selling the put, and then continue with what your opposite number has a right to do.

No. By selling a put you take an obligation to buy at the strike price if the put buyer decides to exercise his right to sell at the strike price. If you think about it, it can’t be otherwise.

Nevertheless I have read once how IB decides which puts get executed, and basically it’s a lottery.

4

I once read the following about options which made them clear once and for all: the cost of the premium buys the buyer the right but no obligation to either buy or sell at the strike price, the seller takes on the obligation to buy or sell for the cost of the premium.

I don’t think Investopedia is wrong, it’s just poorly written because it starts by talking about the seller and then switches to the buyer of the option.

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5

Here is the link btw:

The first sentence is the title of the paragraph!
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