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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 ?
In June 1995, the Ergonomic Protection Standard, as it is known, was put to bed, with OSHA Administrator Joseph Dear saying, "OSHA will continue to work on developing a standard that will have support from reasonable people.
We have a true story about a child who was put to bed with the Tweed children one night in mistake by my father "Percy" Tweed, (his real name was Robert Rueben but was called Percy).
THERE are worries that elderly people dependent on home care provided by council staff could face being put to bed at 6.
Kirsty is still not pregnant, but more importantly, today is the day when Lola will hopefully get baby Lexi back and this whole shame-making storyline can finally be put to bed.
Because this is the day that the title dream could be put to bed.
The study found that insomniacs put to bed with caps filled with the cold water slept 89 per cent of the time they were in bed and nodded off three minutes earlier than those who had no trouble sleeping.
He had the race put to bed in a couple of strides and the way he quickened was really exciting after being last turning into the straight.
SIR - In her formal New Year's message, Secretary of State for Wales Cheryl Gillan has put to bed another myth put out by the "Yes" camp.
As far as Chris is concerned, it has been put to bed for a long time.
IF England expect to succeed in the World Cup, it''s about time that the John Terry/Wayne Bridge saga was put to bed (excuse the pun).
Every club needs stability so hopefully that's it put to bed.
We had hoped that this would have been put to bed, certainly by the start of the Six Nations or indeed by the end.