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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 ?
I saw the front page on Thursday and I think a few people were quite surprised to see both sides put across.
You are no better than anyone else, but that is what you put across.
Voters need to know these two seasoned politicians will be allowed to put across their points while also being put on the spot.
I wasn't happy with the fact the handicapper hadn't dropped the horse after had finished well beaten at Ascot, and that was the point I was trying to put across.
So according to this statement it is fine for a government minister to ask for the execution of this person but not OK for an independent person to put across his owns views about Islam without being threatened with death.
Subsquent to the request of the takeover panel, these directors confirm that they would inform whether or not they plan to put across Glencore's offer to Xstrata stakeholders, by not later than 7.
I'm constantly trying to put across a message of strength and femininity in a real shape," the Mirror quoted her as saying.
to I thought as a boyfriend of a member of staff, it would be useful to put across the viewpoint of the staff.
We are in regular contact with the US and our serious concerns on the recent strikes have been put across strongly" maintained the spokesman.
When I was manager at Manchester City the message was always put across.
That predictability also informs the movie's storytelling, which features a cross-section of standard-issue war-movie characters, each existing to put across a political point.
Following an emotional appeal by his mother earlier this week for Molly's return, Mr Rana, who lives in Manchester, is travelling to Glasgow to put across his father's side of the story.