Option Basics Part 3 – Put Option Buyer perspective

WHAT IS A LONG PUT?

A long put refers to buying a put option, typically in anticipation of a decline in the underlying asset. The term “long” here has nothing to do with the length of time before expiration but rather refers to the trader’s action of having bought the option with the hope of selling it at a higher price at a later point in time. A trader could buy a put for speculative reasons, betting that the underlying asset will fall which increases the value of the long put option. A long put could also be used to hedge a long position in the underlying asset. If the underlying asset falls, the put option increases in value helping to offset the loss in the underlying.

• Investors go long put options if they think a security’s price will fall.
• Investors may go long put options to speculate or hedge a portfolio.
• The downside risk is limited using a long put options strategy.

LEARNING OUTCOMES

• INTRODUCTION TO PUT OPTION – BUYER PERSPECTIVE.
• PUT OPTION CHAIN – BUYER PERSPECTIVE.
• LIVE TRADING EXAMPLE.