◈ GLOSSARY · TRADING & MARKETS
Put Option.
A definition, in plain English — with the books that teach it.
ClearValue Books · reviewed against sources ·
◈ DEFINITION
What it means
Definition
A contract that gives the buyer the right — not the obligation — to sell 100 shares of a stock at a fixed strike price before expiration. People buy puts to bet on a decline or to hedge a long position. Like calls, puts decay every day they sit there, and being directionally right on the stock isn't enough if the move doesn't happen fast enough.
◈ IN PRACTICE
Example
A stock trades at $100. You buy one $95 put expiring in 30 days for $1.50 — $150 total. If the stock falls to $90 at expiration, the put is worth $5.00, or $500 — a $350 gain. If the stock holds above $95, the put expires worthless.
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