Put Option
An options contract giving the buyer the right to sell the underlying asset at the strike price before or on expiration.
Formula
Intrinsic Value = max(0, Strike Price − Spot Price)
A put option profits when the underlying falls below the strike price. The put buyer pays a premium for the right to sell — a bearish or protective position.
Intrinsic value at expiration is max(0, Strike − Spot). If spot is above the strike, the put expires worthless.
Puts are used to hedge long equity positions (see: protective put), express outright bearish views, or as components of spreads and condors.
Example
You own 100 shares of SPY at $520 and buy a 60-day $510 put for $4.50 ($450). If SPY drops to $490, the put is worth $20 at expiry — a $1,550 net gain on the put minus the premium, partially offsetting stock losses.
Related Terms
American vs European Option
Exercise style: American options can be exercised any time before expiry (most single-stock options); European options only at expiry (most cash-settled index options like SPX).
IntermediateButterfly Spread
A 3-leg defined-risk options strategy: buy 1 lower-strike, sell 2 middle-strike, buy 1 higher-strike — all at the same expiry. Max profit if price pins the middle strike.
IntermediateCall Option
An options contract giving the buyer the right to purchase the underlying asset at the strike price before or on expiration.
BeginnerCash-Secured Put
Selling a put while setting aside enough cash to buy the shares if assigned — collecting premium with the willingness to own the stock at the strike.
IntermediateDelta
The rate of change in an option's price for a $1 move in the underlying. Ranges from 0 to 1 for calls and −1 to 0 for puts.
IntermediateIntrinsic Value
The immediate exercise value of an option — how much in the money it is right now, ignoring time and volatility.
IntermediateOptions Contract
A contract giving the buyer the right — but not the obligation — to buy or sell an underlying asset at a set price before or on expiration.
BeginnerPut-Call Parity
The no-arbitrage relationship linking the prices of a European call and put at the same strike and expiry: C − P = S − K·e^(−rT).
AdvancedStraddle
An options strategy involving the simultaneous purchase (or sale) of a call and a put at the same strike and expiration, betting on large moves (or low volatility).
AdvancedStrangle
An options strategy buying (or selling) an OTM call and OTM put at different strikes but the same expiration, cheaper than a straddle but requiring a larger move to profit.
AdvancedStrike Price
The fixed price at which the option holder can buy (call) or sell (put) the underlying asset if they choose to exercise.
BeginnerVertical Spread
An options strategy involving the simultaneous buy and sell of two options of the same type and expiration but at different strikes, limiting both risk and reward.
IntermediateVolatility Skew
The pattern in which implied volatility varies across strikes at the same expiration, usually with OTM puts pricing higher IV than OTM calls.
Advanced