⚠️ Options involve significant risk and are not suitable for all investors. Before trading options, read the OCC Characteristics and Risks of Standardized Options. Educational only; not investment advice. Examples ignore commissions, taxes, and early assignment.

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Long Put

Buy a put: the right to sell 100 shares at the strike. A bearish bet with limited risk.

New to this? A put option gives you the right, but not the obligation, to sell 100 shares at the strike price before expiration. Buyers of puts usually profit when the stock falls. Unfamiliar word? See the options glossary.

Payoff at expiration

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When traders use it

You expect a meaningful decline, or want a hedge.

Formulas (per share; ×100 per contract)

Max profit	K − P (if stock goes to zero)
Max loss	P (premium paid)
Breakeven	K − P

Key risks

Time decay; can lose the whole premium; needs a big enough move soon enough.

How it works

You pay a premium for the right to sell 100 shares at the strike. If the stock ends below the strike, the put is worth strike − stock price. Profit equals that minus the premium. Above the strike, the put expires worthless.

Worked example HYPOTHETICAL

Hypothetical example only — not real prices or a recommendation. Stock at $100. Buy 1 put, 45 days, $100 strike, for $4.00 ($400 paid).

Stock price at expiration	P/L (1 contract, excl. fees)
$80	+$1,600
$90	+$600
$96	$0
$100	−$400
$110	−$400

Market outlook: when to use it

Use when: Bearish expecting a meaningful drop, or hedging a portfolio, with defined risk.

Avoid when: You expect a slow drift lower, or implied volatility is elevated (e.g., after a selloff).

The Greeks, in plain words

Delta	Negative: gains as the stock falls.
Theta	Negative: time decay costs you daily.
Vega	Positive: rising volatility (common in selloffs) helps.
Gamma	Positive: big moves help.

Choosing strikes and expiration

Same logic as calls: ATM for balance, ITM for stock-like exposure, OTM for cheap protection. Choose expiration beyond when you expect the move.

Managing the trade

Take profits into sharp drops (volatility can collapse after). Roll down to lock gains, or sell a lower put to form a bear put spread. Long puts are not assigned.

Common mistakes

Buying puts after a crash when IV is high.
Expecting to be right about direction and timing simultaneously without enough time.

FAQ

Can I buy puts without owning the stock?
Yes; that is a speculative bearish position.

Max profit?
Strike − premium if the stock goes to $0 ($9,600 here).

Explained simply

When would someone use this?

When you expect a stock to fall, or want to bet on a decline with a known maximum loss.

The setup, in plain words

You pay a premium to buy one put. If the stock falls below the strike by more than the premium, you profit.

Max profit, max loss and breakeven

Max profit: Strike − premium, per share, reached only if the stock falls to $0.
Max loss: The premium paid, if the stock ends at or above the strike.
Breakeven: Strike − premium paid.

A simple numeric example (hypothetical)

Stock at $100. You buy a $100 put for $3.00 ($300). At expiration: stock $90 → put worth $10, profit $700. Stock $97 → breakeven. Stock $105 → put expires worthless, loss $300.

The main risks, in plain words

Time decay works against you every day.
Stocks can rise or move sideways, and the put can expire worthless.
Falling implied volatility can reduce the put's value.

Beginner FAQ

Is this the same as shorting?
Both profit from a drop, but a long put has a fixed maximum loss. Shorting stock has unlimited risk if the price rises.

Do I need to own the stock?
No. Buying a put on its own is a bearish trade.