Put option entitles one party

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A long put refers to buying a put optiontypically in anticipation of a decline in the underlying asset.

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A trader could buy a put for speculative reasons, betting that the underlying asset will fall which increases the value of the long put option. If the underlying asset falls, the put option increases in value helping to offset the loss in the underlying.

Form of Option Agreement

Investors may go long put options to speculate or hedge a portfolio. Downside risk is limited using a long put options strategy.

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The Put option entitles one party of a Long Put A long put has a strike pricewhich is the price at which the put buyer has the right to sell the underlying asset. Exercising is not required.

Long Put Strategy Versus Shorting Stock A long put may be a favorable strategy for bearish investors, rather than shorting shares.

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A short stock position theoretically has unlimited risk since the stock price has no capped upside. A long put option is similar to a short stock position because the profit potentials are limited.

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The drawback to the put option is that the price of the underlying must fall before the expiration date of the option, otherwise, the amount paid for the option is lost. If the option is exercised, it will put the trader short in the underlying stock, and the trader will then need to buy the underlying stock to realize the profit from the trade.

Long Put Options to Hedge A long put option could also be used to hedge against unfavorable moves in a long stock position.

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Going long put options allowed you to realize a much greater gain than the 9. Compare Accounts.

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