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 periodicals archive ?
Nottingham Forest are due to face Birmingham City at home on Saturday, August 17, meaning Wrexham's meeting at Meadow Lane has been put back.
A Shire Hall spokesperson said: "The tender stage of the project has been put back whilst we work with utility companies to mitigate costly service diversions.
His solicitor Darragh Mackin said it was put back over the non-appearance in court of some defendants.
On 13th of the current month, the Plant was targeted by terrorists with rocket shells and then put back into service after more than eight- day halt where it began to feed the electrical grid with 66 megawatts.
Everton were due to travel to the Stadium of Light on Saturday, September 10, but that has now been put back to Monday, September 12 and will kick-off at 8pm.
We had the ludicrous situation of a Birmingham MP on the front page of the Mail calling for the cameras to be put back and having the gall to say 'the police just ran away from the situation'.
He put back a key offensive rebound with seconds remaining that made it a two-possession game.
The Wolves game has been put back a day to Sunday, December 4, with a 4pm kick-off, while the Rovers game has also been moved from Saturday to Sunday, and will now take place on December 11 and kick-off at 1.30pm.
At some point--unlike Humpty Dumpty who couldn't be put back together again-your equipment is put back together in like-new condition.
Summary: Harry Redknapp has revealed that Ledley King's groin operation has been put back to next week because the defender lost his passport.
WOMEN who have only one embryo transferred during IVF are almost five times more likely to deliver a baby at full term than those having two embryos put back, according to new research.
Of course you will always get one who will do a runner, only to be caught and put back into closed prison.