Long Put

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DEFINITION of 'Long Put'

An options strategy in which a put option is purchased as a speculative play on a downturn in the price of the underlying equity or index. In a long put trade, a put option is purchased on the open exchange with the hope that the underling stock falls in price, thereby increasing the value of the options, which are "held long" in the portfolio.

The options can either be sold prior to expiration (for a profit or loss) or held to expiration, at which time the investor must purchase the stock at market prices, then sell the stock at the stated exercise price.

Long Put

INVESTOPEDIA EXPLAINS 'Long Put'

The long put strategy represents an alternative to an investor simply selling a stock short, then buying it back at a profit if the stock falls in price. Options can be favored over shorting due to increased liquidity (especially for stocks with smaller floats), increased leverage and a capped maximum loss (the investor cannot lose more than premiums paid).

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    A put option is a contract that gives the option holder the right, but not obligation, to sell a set amount of shares (1 ... Read Full Answer >>
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    If you've ever suffered the frustrating experience of having an order not filled or had a strike price fail to execute because ... Read Full Answer >>
  3. Why should I consider buying an option if it's out-of-the-money?

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  4. How do traders use out-of-the-money options to hedge?

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  5. In what market situations might a short put be a profitable trade?

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