Long Put
Buying a put gives you the right to sell 100 shares at the strike price until expiration. It's the cleanest way to profit from a decline — or to hedge shares you own — with risk capped at the premium paid.
When it makes sense
- You expect a meaningful drop before expiration
- You want defined-risk downside exposure without shorting stock
- You're hedging a long stock position through an event
How it works
Buy one put at your chosen strike and expiration. Maximum loss is the premium. Breakeven at expiration is the strike minus the premium. The put gains value as the stock falls and as volatility rises.
Risk & reward
Maximum loss: premium paid. Maximum profit: substantial but bounded (the stock can only fall to zero). Time decay works against you, and puts are usually priced richer than calls because of skew — you're paying up for crash protection.
Worked example
Stock at $80. Buy the 45-day $75 put for $1.80 ($180). If the stock falls to $65, the put is worth $10.00 — an $820 profit. If the stock holds above $75, you lose the $180.
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