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Related to puts: puts and calls, Married puts, Covered Puts


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 classic literature ?
I have heard some of my townsmen say, "I should like to have them order me out to help put down an insurrection of the slaves, or to march to Mexico--see if I would go"; and yet these very men have each, directly by their allegiance, and so indirectly, at least, by their money, furnished a substitute.
Why does it not encourage its citizens to put out its faults, and do better than it would have them?
When it was dark I set by my camp fire smoking, and feeling pretty well satisfied; but by and by it got sort of lonesome, and so I went and set on the bank and listened to the current swashing along, and counted the stars and drift logs and rafts that come down, and then went to bed; there ain't no better way to put in time when you are lonesome; you can't stay so, you soon get over it.
Anyway, they dogged along after him all day Saturday and kept out of his sight; and towards sundown he come to the bunch of sycamores down by Uncle Silas's field, and he went in there to get a disguise out of his hand-bag and put it on before he showed himself here in the town--and mind you he done that just a little after the time that Uncle Silas was hitting Jubiter Dunlap over the head with a club--for he DID hit him.
Commands from Miss Ingram's lips would put spirit into a mug of milk and water.
She had learned to dress herself by this time and she put on her clothes in five minutes.
His active little crutch was heard upon the floor, and back came Tiny Tim before another word was spoken, escorted by his brother and sister to his stool before the fire; and while Bob, turning up his cuffs -- as if, poor fellow, they were capable of being made more shabby -- compounded some hot mixture in a jug with gin and lemons, and stirred it round and round and put it on the hob to simmer; Master Peter, and the two ubiquitous young Cratchits went to fetch the goose, with which they soon returned in high procession.
Some of the boys about me put in their claim not to be forgotten in the distribution of the good things, as I got out of my seat with great alacrity.
The clock struck six and, having swept up the hearth, Beth put a pair of slippers down to warm.
I'll teach you to put your hands on my boy, you beast," roared the sa- loon keeper, who, tired of beating the master, had begun to kick him about the yard.
She put it into her hands as she spoke; and when Elinor saw the painting, whatever other doubts her fear of a too hasty decision, or her wish of detecting falsehood might suffer to linger in her mind, she could have none of its being Edward's face.
WHILE leading the way upstairs, she recommended that I should hide the candle, and not make a noise; for her master had an odd notion about the chamber she would put me in, and never let anybody lodge there willingly.