Put Option
Also called: put
A contract that gives its owner the right to sell 100 shares at a set price by a set date.
A put is the mirror image of a call. Owning a put gives you the right to sell 100 shares at the strike price, so it gains value when a stock falls (useful as insurance). Selling a put means you collect cash now and agree to buy 100 shares at the strike if you are assigned, which is the heart of a cash-secured put.
For example
You sell one $20 put and collect $60. If the stock stays above $20, you keep the $60. If it drops to $15, you must buy 100 shares at $20 (paying $2,000 for shares now worth $1,500), softened by the $60 you were paid.
Related terms
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