Buying Put Options Explained Apr 2026

Limited to the premium paid. If the stock stays flat or goes up, you only lose the money you spent to buy the option.

Stock XYZ stays at $100 or rises. Your option expires worthless. Your total loss is the $200 premium. buying put options explained

Stock XYZ drops to $80. You can sell at $95. Your profit is $13 per share ($15 gain minus the $2 premium). Limited to the premium paid

The deadline. If the stock doesn't drop by this date, the option expires worthless. Your option expires worthless

If you own 100 shares of a company and fear a market dip, buying a put acts as a floor. If the stock plummeted, you could still sell your shares at the strike price, limiting your total losses. 2. Speculation (Profiting from a Drop)

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Unlike holding a stock forever, options have a "fuse." Every day that passes without a price drop reduces the value of your option. A Quick Example