What is a put option?
1In one sentence
A put is the right to sell 100 shares at a set price, before a set date. You pay a small fee for that right.
You buy puts when you think a stock is going down. If it falls below your price, the put gains value. If it doesn't, you lose only the fee.
2Try it: drag the dot
Example: NVDA is $215 today. You buy the $200 put that ends in 30 days, for $4 a share ($400).
33 words to know
Strike$200
The price you get to sell at. The stock has to fall below it for the put to be worth something at the end.
Premium$400
What the put costs. It's the most you can lose.
Expiration30 days
The last day the put counts. After it, the put is either worth something or worth zero.
4Watch out
- It can go to zero. If the stock ends above the strike, you lose all of what you paid.
- Below the strike isn't enough. You need the stock under the break-even (strike minus what you paid) to profit.
- Fear makes puts expensive. When markets are nervous, puts cost more, so the stock has to fall further to pay off.
5Quick check · 3 questions · optional
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Common questions
What is a put option?
A put option is a contract that gives you the right, but not the obligation, to sell 100 shares of a stock at a set price (the strike) before a set date (the expiration). You pay a fee for it, called the premium.
What is the most you can lose buying a put?
The premium you paid. If the stock ends above the strike at expiration, the put expires worthless and you lose that fee, nothing more.
Is a put's profit unlimited?
No. A stock can only fall to $0, so the most a put can make is the strike minus the premium, times 100. Unlimited risk only comes from selling options without protection.
Education only. Examples use illustrative numbers. Not financial advice; you make your own decisions.