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An option granting the right to sell the underlying futures contract. Opposite of a call.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
We need to investigate if pressure was put upon civil servants HEIDI ALEXANDER shadow health sec
Put Upon Jo has toured schools in Lanarkshire and Ayrshire.
But when their exisistence is threatened by a rival police troop, a huge marijuana bust offers them the chance to prove themselves to their put upon boss.
"The changes in the Mass that were made after Vatican II were not explained enough to people--they were `put upon' them, and anything put upon you you resist," she says.
When he had asked his son's forgiveness for the pressure he had put upon him, his son began to change his ways.
The NHS Executive said that more responsibility would be put upon employers to check nurses details.
Our midwives do a sterling job and any further pressure put upon them is just not acceptable.
Yes, there was a hoarding up and soil was put upon Alfie's grave but ground panels had been put down and windmills and teddies had been placed in between the top of Alfie's and Connor's graves ...
But both are equally disillusioned with the pressures their lives put upon them.
He was protesting about pressure put upon Dr John, leading to his withdrawal from his newlyappointed role as Bishop of Reading.
If your life is threatened by cancer and you are attending an out-patient clinic at your specialist hospital for radio or chemotherapy, I think you have a right to feel more than a tad put upon when you're expected to cough up for car parking charges for the privilege of being attended to.
After ushering her indoors, Mr Quinn said: "She is much better but she is still not well and is feeling put upon."