Options & Derivatives
Put Option
Buying a put is a bet that a stock will fall, or a way to insure a position against a decline. The strike price sets the level at which the holder can sell, regardless of how far the stock drops.
Puts gain value as the underlying falls below the strike. Because the buyer's loss is limited to the premium paid, puts offer a defined-risk way to profit from or hedge against downturns.
Investors commonly buy puts as portfolio insurance, protecting gains during uncertain periods, or as a directional bet when they expect a stock or index to decline.
Example
Buying a put with a $50 strike lets you sell the stock at $50 even if it crashes to $30, capping your downside.
Related terms
Put Option — FAQ
What is Put Option?
A put option is a contract giving the buyer the right, but not the obligation, to sell an asset at a set price before a specified expiration date.
Can you give an example of Put Option?
Buying a put with a $50 strike lets you sell the stock at $50 even if it crashes to $30, capping your downside.
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