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Put

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Dictionary Says

Definition of 'Put'

An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time. The buyer of a put option estimates that the underlying asset will drop below the exercise price before the expiration date.

The possible payoff for a holder of a put option contract is illustrated by the following diagram:

Put
Investopedia Says

Investopedia explains 'Put'

When an investor purchases a put, he or she expects the underlying asset will decline in price. The investor will then profit by either selling the put options at a profit, or by exercising the option. If an investor writes a put contract, he or she is estimating the stock will not decline below the exercise price, and will not fall significantly below the exercise price.

Consider if an investor purchased one put option contract for 100 shares of ABC Co. for $1, or $100 ($1*100). The exercise price of the shares is $10 and the current ABC share price is $12. This contract has given the investor the right, but not the obligation, to sell shares of ABC at $10.

If ABC shares drop to $8, the investor's put option is in-the-money and he can close his option position by selling the contract on the open market. On the other hand, he can purchase 100 shares of ABC at the existing market price of $8, then exercise his contract to sell the shares for $10. Excluding commissions, the total profit for this position would be $100 [100*($10 - $8 - $1)]. If the investor already owned 100 shares of ABC, this is called a "married put" position and serves as a hedge against a decline in share price.

Directory (Option Strategy)

  1.

    Alligator Spread

  2. Atlantic Spread

  3. Back Fee

  4. Backspread

  5. Bailard, Biehl And Kaiser Five-Way Model

  6. Bear Call Spread

  7. Bear Put Spread

  8. Bear Spread

  9. Bear Straddle

  10. Box Spread

  11. Bull Call Spread

  12. Bull Put Spread

  13. Bull Spread

  14. Bullet Trade

  15. Butterfly Spread

  16. Buy A Spread

  17. Calendar Spread

  18. Call Ratio Backspread

  19. Collar

  20. Collar Agreement

  21. Condor Spread

  22. Contingent Order

  23. Conversion Arbitrage

  24. Covered Call

  25. Covered Combination

  26. Covered Straddle

  27. Credit Spread

  28. Death Put

  29. Debit Spread

  30. Delta Hedging

  31. Delta Neutral

  32. Delta Spread

  33. Diagonal Spread

  34. Dividend Arbitrage

  35. Double One-Touch Option

  36. Fence (Options)

  37. Fiduciary Call

  38. Fixed Dollar Value Collar

  39. FMAN

  40. Forex Hedge

  41. Forex Option & Currency Trading Options

  42. Form 6781: Gains And Losses From Section ...

  43. Front Fee

  44. Gut Spread

  45. Heston Model

  46. Horizontal Spread

  47. Implied Volatility - IV

  48. Interest Rate Collar

  49. Iron Butterfly

  50. Iron Condor

  51. Leg

  52. Leg Out

  53. Long Jelly Roll

  54. Long Leg

  55. Long Put

  56. Long Straddle

  57. Long-Term Equity Anticipation Securities ...

  58. Married Put

  59. Modidor

  60. Multi Index Option

  61. Multi-Leg Options Order

  62. Naked Call

  63. Naked Put

  64. Negative Butterfly

  65. Net Option Premium

  66. Neutral

  67. Option Premium

  68. Outright Option

  69. Overwrite

  70. Overwriting

  71. Positive Butterfly

  72. Protective Put

  73. Put

  74. Put Calendar

  75. Put Ratio Backspread

  76. Ratio Call Write

  77. Ratio Spread

  78. Reverse Calendar Spread

  79. Reverse Conversion

  80. Risk Reversal

  81. Roll Down

  82. Roll Forward

  83. Roll Up

  84. Seagull Option

  85. Sell To Open

  86. Series 4

  87. Short Leg

  88. Short Straddle

  89. Straddle

  90. Strangle

  91. Swing Option

  92. Synthetic Dividend

  93. Variable Ratio Write

  94. VIX Option

  95. Writing An Option

  96. Zero Cost Collar

  97. Zomma

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