GLOSSARY // Options
Put Option
A put option is the right to sell 100 shares of the underlying at the strike price before expiration. Puts gain value as the stock falls, which makes them the standard instrument for betting against a stock with defined risk or for insuring a long position.
A long put risks only the premium paid, unlike a short stock position, which loses without limit on the way up. Breakeven at expiration is the strike minus the premium: the stock has to fall below that level for the trade to profit.
With a stock at $95, you buy one 90 put for $2.00 ($200 per contract). Breakeven is $88.00. If the stock drops to $80 by expiration, the put carries $10.00 of intrinsic value and is worth $1,000 — an $800 profit. If the stock holds above $90, the put expires worthless and the loss is capped at $200.
Put it to work
Related terms
Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.