What is a Put Option?

A put option gives its holder the right, but not the obligation, to sell at the specified strike price, within a specified window of time. The put seller is obligated to buy the underlying asset at the strike price if the buyer chooses to exercise the option at any point before expiration.

Calls and Puts Chart

If you hold a put for stock XYZ with a strike price of $50, you have the right to sell 100 shares of XYZ for $50 at any point between the time you purchased the put and its expiration date. Any time XYZ’s stock is below $50, the put is in-the-money. When XYZ is above $50, the put does not have real value for the holder, and is out-of-the-money.

When a put is exercised, the seller is obligated to purchase 100 shares of the underlying stock at the strike price.

Find put trades with the Trade Idea Generator.

Up next: