Long Put
Buying a put for the right—but not the obligation—to sell the underlying at the strike price during the contract term.
What is a Long Put?
Buying a put for the right—but not the obligation—to sell the underlying at the strike price during the contract term.
Construction
Buy one put option. Confirm whether settlement involves shares or cash and when exercise instructions are due.
When it may be studied
To study defined-risk bearish exposure or potential protection for an existing position.
Expiration profile
Maximum risk: Premium paid
Maximum reward: Substantial but limited by underlying reaching zero
Break-even: Strike price minus premium paid at expiration
Worked example
A 100-strike put purchased for $4 costs $400. The simplified expiration break-even is $96. If the underlying finishes at $90, intrinsic value is $10 per share before subtracting cost.
Key risks and limitations
The premium can be lost if the decline is too small, arrives too late, or is offset by volatility and pricing changes.
Entry and exit checklist
- Confirm contract multiplier, expiration, exercise style, settlement, and liquidity.
- Calculate the maximum loss under the intended structure.
- Review earnings, dividends, corporate actions, and other event risks.
- Define an exit, adjustment, or expiration plan before entry.
- Understand what happens if one leg is assigned or exercised early.