What is Put Option?
A contract giving the holder the right to sell a stock at a specified price before expiration.
📖 Complete Definition
A put option is a financial contract that gives the buyer the right, but not the obligation, to sell an underlying asset at a predetermined strike price before or on the expiration date. Put buyers profit when the underlying stock falls below the strike price minus the premium paid. Puts are commonly used for hedging portfolio risk or speculating on downside moves.
💡 Examples
- →Buying an SPY $450 put gives you the right to sell 100 shares of SPY at $450
- →If SPY drops to $420, your put is worth at least $30 per share ($3,000 total)
❓ Frequently Asked Questions
When should I buy a put option?
Buy put options when you expect the underlying stock to decline, or to hedge existing long stock positions against downside risk.
Can I lose more than my investment on a put?
As a put buyer, your maximum loss is limited to the premium paid. As a put seller, potential losses can be substantial if the stock drops significantly.
🔗 Related Terms
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