put

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Put

An option granting the right to sell the underlying futures contract. Opposite of a call.

Put Option

An option contract in which the holder has the right but not the obligation to sell some underlying asset at an agreed-upon price on or before the expiration date of the contract, regardless of the prevailing market price of the underlying asset. One buys a put option if one believes the price for the underlying asset will fall by the end of the contract. If the price does fall, the holder may buy and resell the underlying asset for a profit. If the price does not fall, the option expires and the holder's loss is limited to the price of buying the contract. Put options may be used on their own or in conjunction with call options to create an option spread in order to hedge risk.

put

1. An option that conveys to its holder the right, but not the obligation, to sell a specific asset at a predetermined price until a certain date. In most cases, puts have 100 shares of stock as the underlying asset. For example, an investor may purchase a put option on GenCorp common stock that confers the right to sell 100 shares at $15 per share until September 21. Puts are sold for a fee by other investors who incur an obligation to purchase the asset if the option holder decides to sell. Investors purchase puts in order to take advantage of a decline in the price of the asset. Also called put option. Compare call. See also guarantee letter, synthetic put, transferable put right.
2. Sale of an issue of bonds before maturity by forcing the issuer to buy at par. Few bond issues permit the holder this option.
Putting things into perspective: How to hedge, using puts. How to speculate, using puts.

A put option has an inverse relationship to the underlying security. As the value of the stock increases, the value of the put decreases. Like calls, puts can be used for both hedging and speculation. Puts can be purchased in conjunction with stock ownership as a form of insurance (that is, a hedge) against downside loss on a stock. If the stock price declines, the put holder can either sell the put and keep the stock, or exercise the put and sell the stock at the put's strike price. In either case, the increased value of the option will offset the stock loss to some degree. If the stock price rises beyond a certain level, the put will expire worthless. In this case, the put holder will lose the premium paid for the option but will still participate in the upward stock movement. The break-even point occurs when the stock price advances beyond the put's strike price plus the premium. Puts also can be used speculatively without a position in the underlying security. Instead of selling a stock short, an investor who anticipates a decline in the price of a stock can buy an at-the-money put. If the stock price rises, causing the put to expire worthless, the maximum loss is the premium paid for the put. But if the stock price declines substantially, the investor could make profits that far exceed the initial cost of the put.

Henry Nothnagel, Senior Vice President—Options, Wachovia Securities, Inc., Chicago, IL

put

To force the seller of a put option to purchase shares of stock at the stipulated price. Puts are exercised by the owner only when the market price of the underlying stock is less than the strike price. Also called put to seller.
References in classic literature ?
She put back the notes at once, without a second glance at them, and then sat looking thoughtfully at the lock of hair as it lay on her lap.
The dinner was put back an hour, and we were sitting round the fire with no light but the blaze when the hall-door suddenly burst open and the hall resounded with these words, uttered with the greatest vehemence and in a stentorian tone: "We have been misdirected, Jarndyce, by a most abandoned ruffian, who told us to take the turning to the right instead of to the left.
SENTENCING for a Rhyl man who walked into a bank armed with an axe and a knife last October has been put back again.
SPECIAL meetings of health boards across South Wales to discuss recommendations on the future of hospital services across the region have been put back to the New Year.
There is talk that the quarantine might be put back a week, so there is a possibility we can get a run into him beforehand.
Industry leaders say the Government's decision to put back measures which would help small businesses by two years will be devastating to rural stations.
He added that it was almost impossible to spot as the hubs had been put back on.
She said: "We talked to the International Federations yesterday, we were able to put back into the pot for sale around 3,000 tickets last night, they have all been sold.
Albion's home date with Southampton has been put back two days and will be shown on Monday, November 5 (8pm).
Managing director Gary Hampton said: "Windows Plus is a local family-run business who realise that without the local community they would not be where they are today, so at times such as this it is important to put back into the community.
He put back a key offensive rebound with seconds remaining that made it a two-possession game.
A FRAUD suspect's trial had to be put back yesterday - because he is radioactive.