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 ?
If you don't put down 20 percent, the cost of PMI varies based on your loan-to-value ratio -- the amount you owe on your mortgage compared to its value -- and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.
We decisively condemn attempts to use brute force against protesters and activists … We are particularly indignant about the criminal order of (Ukrainian Acting President Oleksander Turchinov) to use the army to put down protest.
Dr Lesley Dickie, executive director of the European Association of Zoos and Aquaria (Eaza), told BBC Radio 4's The Report that between 3,000 and 5,000 healthy animals are put down every year across Europe.
Rewilding, Godolphin's top older horse this year, was humanely put down after breaking his near fore leg," said Godolphin in a statement on its website.
Animal charity Save Our Strays has now taken Barney into its care after being told he would be put down.
At least 3,690 dogs - including pups as young as three weeks old - have been put down by Welsh councils since 2001 because they have been dumped or abused.
CONNECTIONS of Deanridge Fury suffered a dreadful blow last week when the dog had to be put down after sustaining injuries in last Saturday's John J Casey Open 575 final at Shelbourne.
Homebuyers have seen the deposit they need to put down for a mortgage triple during the past two years.
A COW donated by the RSPCA to a Hindu monastery to replace one they put down has given birth.
An Internet posting some years ago was eloquent in its simplicity: "Does anyone doubt that if the Arabs put down their weapons, there'd be no war, and if Israel put down its weapons, there'd be no Israel?
Ring ring put down the phone, you must not call that place again.
James Smith's Staffordshire bull terrier had to be put down six weeks after being repeatedly gored with a knife and bottle because it was in constant agony.