Understanding Put Options: A Beginner's Guide

What is a Put Options?

[{"selector":"#anim-06e62fed-d00e-4354-a525-fc249d9a9254","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-839031b5-6f16-4977-998f-1696076ffd67","keyframes":{"transform":["translate3d(-117.46575%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-c946b81d-1f90-4265-9818-76bbe5a18f5e","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-a0bc80ca-1c4b-48cb-9895-abe9da7076f5","keyframes":{"transform":["translate3d(0px, 151.23178%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] A put option is a financial contract that grants the buyer the right, but not the obligation, to sell an underlying asset (Such as Stocks, Currencies, or Commodities) at a specified price (Known as the strike price) within a predetermined period.

How Do Put Options work?

[{"selector":"#anim-2f4c53a6-b9dc-4bb1-bd9f-bafb9dc1a60f","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-549ea2a7-2d1a-4a29-b5d3-b10a9d282f12","keyframes":{"transform":["translate3d(-124.65754%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}]

Put Options Trading

[{"selector":"#anim-34dd6423-9fba-4021-932a-b046b6078fbf","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-f35fef37-2abf-42dc-9f6b-7db437f35785","keyframes":{"transform":["translate3d(0px, 438.54579%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-d3024b85-d1ff-4ce0-883c-032655d2488d","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-f2ff490d-e340-4c6f-a5bc-786a67b576bb","keyframes":{"transform":["translate3d(-116.78082%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] There are Two Types of Trading in Put Option: Put Option Buying and Put Option Selling.

Buying a Put Option

[{"selector":"#anim-3d7196a5-7be1-4e69-8046-553b8daef6f1","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-ee60e8c9-2c76-4ebc-ac91-e8857fafa77e","keyframes":{"transform":["translate3d(0px, 386.82710%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-b605653e-167f-4e13-b3c9-3b6b5ec7b351","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-8cb2f294-a994-419b-b607-f44ba28a2448","keyframes":{"transform":["translate3d(-115.45454%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] - Example Of Put Option Buying - Potential Profit - Potential Loss - The Payoff Chart for Put Option Buy

Selling (Shorting) a Put Option

[{"selector":"#anim-1877add0-c64e-4d33-8d34-78f3881d04cb","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-be82352d-a320-42c3-8e92-edfae04ee926","keyframes":{"transform":["translate3d(0px, 247.22225%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-e67f4f7a-8e06-41ed-8ba6-a514c4e3674a","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-ae9c1e4e-2907-440e-8271-fb75f159c93c","keyframes":{"transform":["translate3d(-116.43836%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] - Example Of Put Option Selling - Potential Profit - Potential Loss - The Payoff Chart for Put Option Selling

Benefits of Put Options

[{"selector":"#anim-fe0ad518-c9a8-4c03-af44-b1c7989e14b4","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-34f66f6d-346c-4cd6-8bad-13725b5ab8ce","keyframes":{"transform":["translate3d(0px, 390.39773%, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-2a8ba8b9-6005-40c2-9dad-1188e188fc46","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-2ca3f2b6-be5b-4a6b-8f6b-64988dda0b38","keyframes":{"transform":["translate3d(-116.43836%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] - Hedging - Speculation - Limited Risk

Read our blog to know in detail about Put Options Trading

[{"selector":"#anim-347f2e74-6afa-4aed-a864-9cd57e90895e","keyframes":{"opacity":[0,1]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] [{"selector":"#anim-abeb48ee-9723-4859-90ef-324265bcb162","keyframes":{"transform":["translate3d(112.69349%, 0px, 0)","translate3d(0px, 0px, 0)"]},"delay":0,"duration":600,"easing":"cubic-bezier(0.2, 0.6, 0.0, 1)","fill":"both"}] Arrow