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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 classic literature ?
He gathered up the letters thoughtfully, smoothing them with his hand; put them into their little bundle; and placed it tenderly in his breast again.
3 : to cause to undergo something <Our class puts them to shame.
was being constructed over the past five years, Chief Information Officer Joanne Kossuth saw the opportunity to put enough network power into buildings for decades.
Simply put, in exchange for an upfront cash premium, you surrender your participation in the stock's price appreciation beyond the strike price.
A young basketball player is diagnosed with bone cancer, and his coach says, ``When something like that happens, it kind of puts the importance of basketball in perspective.
59, meaning that in the January and February series combined, there are 159 open puts for every 100 open calls.
Eastern Time, 4,251,525 calls have changed hands compared to 2,196,207 puts, equaling a single-day put/call volume ratio of 0.
Our tables of notably active calls and puts are dominated by exchange-traded funds (ETFs) today, with the iShares Russell 2000 Index Fund (IWM) taking center stage.
In the front three-months' series combined, there are nearly 45,000 open puts at the 52.
This option, which is roughly four months from expiration and nearly 10 percent in the money, ultimately saw its open interest grow by more than 10,600 puts.
Currently, only 2,961 puts reside at the stock's November 19 put, but this pile of bearish bets could be set for a few new additions; about 11,000 new additions.
Meanwhile, MDY continues to hold above short-term support at the 142 mark, keeping both of these puts out of the money by a decent margin (but bear in mind that they will not expire for two months).