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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 ?
The final details on putting forward the certificates are currently being revised to avoid failure, as has happened with the Egyptian dollar certificate put forward by NBE in May 2012, the source said.
She added: "After a full, in depth consideration of the business plan put forward by the Friends Of The Coliseum, it was felt that it did not provide enough security for the company and consequently the building will now be put up for sale.
New Labour councillors threw out a similar measure put forward by Plaid Cymru in Torfaen council.
The resolution will be put forward at a meeting of the 5 permanent members of the Security Council later today in New York.
In a judgement, delivered on 13 July 2011, the General Court rejected all the arguments put forward by the Schindler Group in its appeal and consequently decided to maintain the fines imposed upon it, contrary to fines levied against ThyssenKrupp.
The Meriden MP said: "This fund allows them to put forward their ideas to help people in the poorest parts of the globe with successful projects receiving funding to turn their vision into reality.
Last week, senior NHS sources said that the Prince Charles Hospital in Merthyr and the Princess of Wales Hospital in Bridgend are likely to be put forward to keep specialist services, meaning that the Royal Glamorgan, Llantrisant is vulnerable to losing some services.
But the conditions which it has now put forward -- or at least been rumored to have put forward -- indicate that it is, in fact, acting out of selfish concerns.
Clift, 32, has had no evidence put forward to two fraud charges and two money laundering charges.
Anwar Saifullah who hails from District Lakki Marwat also apprised the Governor about some of the problems being faced by the people of the area and put forward suggestions for their solutions as well.
Summary: His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has called on the public to submit their proposals on the best initiatives that could be put forward and adopted during the holy month of Ramadan.
The Government has also put forward controversial plans to sell England's forests for some pounds 250m to private companies, community groups and charities.