Put Option
Last reviewed: September 2, 2026
A put option gives its buyer the right, but not the obligation, to sell an underlying asset at a specified strike price under the terms of the option contract. The buyer pays a premium for that right.
Reviewed September 2026
Simple example
You buy a put option with a $50 strike price for a $2 premium. If the stock falls to $40 and the option can be exercised at $50, the option has $10 of intrinsic value before considering the $2 premium and other costs.
Why investors buy puts
A put can be used to speculate on a price decline or to hedge an existing position. For example, an investor who owns shares may buy a put to limit downside below a certain price for a period of time.
Buyer and seller risk
The put buyer’s direct loss is generally limited to the premium paid if the option expires worthless. The put seller can face much larger losses if the underlying price falls substantially, because the seller may be required to buy at the strike price.
Put vs. call
A put gains value from the right to sell at the strike price; a call gives the buyer the right to buy. Both depend on factors including the underlying price, strike price, time to expiration and volatility.