Also found in: Dictionary, Thesaurus, Medical, Legal, Acronyms, Idioms, Encyclopedia, Wikipedia.


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 ?
put forward : propose 1 <The committee put forward a new plan.
But we tell them that they can have more network utilization if they put in some research grant money, or a department charge-back.
In Operation Iraqi Freedom we found this guy, we located him, we got him out of his basement, we brought him with his tribal kit, we put him in the Air Operations Center, and we put the space assets into the realo time fight.
the $2,000 a year you could put away, tax-free, while the account grew, tax-deferred, until retirement.
The new lineup put together UCLA's best basketball of the season at Pauley.
And even though he never envisioned himself accomplishing the feats he has over the past three years - including the world title, five NCAA titles and a collegiate record of 72 feet, 2-1/4 inches in the shot put - he now wants to strive for goals others have thought impossible.
The stock has found its way onto our most-active options list today, as more than 8,000 puts have crossed the tape at its October 20 strike.
The notes and the shares of Forest City Class A common stock that may be issuable upon a put of the notes have not been registered under the Securities Act of 1933, as amended, or any state securities laws, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended, and applicable state laws.
This is now the site of peak put and call open interest in the October series.
In connection with the offering, Forest City expects to enter into a puttable note hedge transaction and warrant transaction with one or more of the initial purchasers of the notes to increase the effective put exercise price of the notes.
Today, however, WHR is sucking down put contracts in the options pits.
Eastern Time, 1,683,197 calls have changed hands compared to 1,462,702 puts, equaling a single-day put/call volume ratio of 0.