Put Option
In short
The right to sell a stock at a fixed price before expiration
A put option is like insurance for your stocks. If you own shares and buy a put, you can sell them at the strike price even if the stock crashes. You pay a premium for this protection.
A put option grants the holder the right (not obligation) to sell 100 shares at the strike price before expiration. Puts gain value when the underlying falls. Used for bearish speculation, portfolio hedging, and protective put strategies.
Formula
Put Profit = max(0, Strike - Stock Price) - Premium PaidRelated concepts
- Call Option — A call option is like a coupon that lets you buy a stock at today's price even in the future. If the stock rises, you profit. If it falls, you only lose what you paid for the coupon (the premium).
- Delta — If a call has delta of 0.5, it gains $0.50 for every $1 the stock rises. Delta 1.0 means the option moves dollar-for-dollar with the stock. At-the-money options typically have delta near 0.5.
- Protective Put — Like buying insurance on your car. You own 100 Apple shares and buy a put at $150. If Apple crashes to $100, your put lets you sell at $150. You paid a premium for this safety net.
- Strike Price — The strike price is the agreed price in the option contract. For a call, you can buy the stock at the strike. For a put, you can sell at the strike. Choose your strike based on how big a move you expect.