What Is Put Option? Meaning & Example
Definition
A put option gives the buyer the right to sell an asset at the strike price before expiration. Puts can be used to profit from declines or to protect existing holdings.
Related terms
A call option gives the buyer the right to buy an asset at the strike price before expiration. Buyers profit if the price rises enough above the strike to cover the premium paid.
Strike PriceThe strike price is the set price at which an option holder can buy (call) or sell (put) the underlying asset. It determines whether an option has intrinsic value.
Option PremiumThe premium is the price paid by an option buyer to the seller. It reflects intrinsic value, time remaining and expected volatility.
What is Put Option?
A put option gives the buyer the right to sell an asset at the strike price before expiration. Puts can be used to profit from declines or to protect existing holdings.
Can you give an example of Put Option?
Owning a $40 put on a stock that falls to $32 lets you sell at $40 instead.