Long Put

Leveraged bearish bet with capped downside. Outlook: bearish. Direction: debit. Risk: defined.

A long put is the mirror image of a long call: a leveraged bearish bet with loss capped at the premium paid. You pay premium upfront for the right to sell 100 shares at the strike, and you profit as the underlying falls.

Long puts are also the canonical hedging instrument — pairing a long put with long shares creates a protective put position that behaves like stock with a built-in floor.

Break-Even

Break-even = strike − premium per share. Below this level the put has positive P/L at expiration.

Max Profit

Maximized if the underlying goes to zero: (strike − premium) × 100 × contracts.

Max Loss

Limited to the premium paid per share × 100 × contracts.

When to Use

• You expect a directional move lower within the life of the option.
• You want defined-risk bearish exposure without shorting stock (no margin, no borrow).
• You want to hedge an existing long position (protective put).
• IV is cheap relative to expected realized move.

Common Pitfalls

• Same theta decay problem as long calls — time is working against you.
• Put skew means OTM puts often trade at higher IV than calls, making them relatively more expensive.
• IV crush after an event can kill the position even on favorable moves.
• Break-even requires the underlying to fall by more than the premium paid.

Try This on a Live Ticker

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