A Put gives the buyer the right, but not the obligation, to sell a stock at a specified price (strike price) on a specified date. These are used exclusively in Options Trading (Futures Options included).
A Trader generally buys a Put when they are bearish on the underlying (stock). Being long a Put results in a risk of the initial capital in exchange for theoretically unlimited gains. Trader's also sell short Puts, also known as writing a Put, as n income strategy with hopes of keeping the premium they received by taking on the risk to write the option.
Check out the interactive risk plot profile below to get a feel for what a Long Put (buying Puts) strategy looks like from a profit/loss perspective.
There are many ways to utilize Puts, and we will be taking full advantage of all of them within our Options Trading System.
Related terms: Call Option, Iron Condor, Vertical Spread, Calendar Spread, Rho, CBOE, The Greeks, Implied Volatility, What is an Option?