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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.


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


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 periodicals archive ?
A court decision has put off the end for Sprint s WiMax network, which was slated to close on Friday after a rocky seven-year history.
Painting a room was the most common job to put off, according to a poll.
At the end of the fire, which was hardly put off by workers and fire brigade teams, a great deal property damage occurred.
When it comes to selling your house beware of any previous occupants who might be still lingering as they may put off potential buyers.
This column's theory is that punters are being put off by the fact they're going for an unprecedented fourth tournament win in a row.
Synopsis: Three in 10 Americans say they put off medical care for themselves or their family in the past year because of the cost -- higher than what Gallup found in the early 2000s.
A poll for The Information Standard - an organisation backed by NHS England - found 41% of people have put off visiting their doctor despite worrying symptoms, with more than two thirds saying this led to their problem getting worse or not going away.
London, Apr 14 ( ANI ): 41 percent of people say that they put off tackling repairs or home improvements because they do not have the required knowledge, a new survey suggests.
More than half of those with no health insurance put off care, but so did 30% of those with private health insurance.
ISLAMABAD -- Islamabad District Court Bar Association President, Syed Javed Akbar Mashhidi Tuesday put off the strike call as compromise effected between Advocate Raja Haroon Qadeer and the accused persons last night.
Summary: The Football Association has decided to put off naming a permanent England manager until the end of the season.
But it was put off when a sheriff heard how Ferguson was radioactive after having iodine therapy for a thyroid condition.