Put Option
A put option gives its holder the right, but not the obligation, to sell an underlying asset at a specified strike price before or at expiration, depending on contract style.
✦ Key Insight
Puts are commonly used for downside exposure, hedging, and volatility strategies.
✕ Common Misconceptions
Buying a put can lose the full premium, while selling puts can create large obligations.
Detailed Explanation
In Practice
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Strike Price
The strike price is the predetermined price at which an option can be exercised according to its contract terms.
Expiration Date
An expiration date is the date and time after which an option or expiring derivatives contract is no longer active.
Option Premium
Option premium is the price paid by an option buyer and received by an option seller for the contract.
Implied Volatility (IV)
Implied volatility is the volatility level that an option pricing model backs out from the option's current market price.
Delta
Delta estimates how much an option's price may change for a small change in the underlying asset price, all else equal.