Explained | Buying Put Options

When you buy a put, you are "long" the option and "short" the underlying stock's direction. The upfront cost you pay to buy the option.

If you own 100 shares of a company and fear a market dip, buying a put acts as a floor. If the stock plummeted, you could still sell your shares at the strike price, limiting your total losses. 2. Speculation (Profiting from a Drop) buying put options explained

Substantial. Theoretically, a stock can go to zero, making your right to sell it at the strike price very valuable. When you buy a put, you are "long"

Unlike holding a stock forever, options have a "fuse." Every day that passes without a price drop reduces the value of your option. A Quick Example If the stock plummeted, you could still sell

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The deadline. If the stock doesn't drop by this date, the option expires worthless.

Imagine Stock XYZ is trading at $100. You buy a $95 Put Option for a $2 premium (total cost $200, as one contract covers 100 shares).