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VeteransBearish
Long Put
Overview
The most basic bearish options strategy — buying a put option gives you the right to sell the underlying at the strike price. You profit when the stock falls below your breakeven (strike - premium). Alternative to short selling with defined risk.
Max Profit
Strike Price - Premium paid (substantial)
Max Loss
Limited to: Premium paid
Breakeven
Strike Price - Premium paid
Structure
Long 1 Put
Risk Profile
Substantial profit potential (to strike minus premium if stock goes to zero). Risk limited to premium.
When to Use
When you expect the stock to decline. When you want bearish exposure with limited risk. When you want to avoid the unlimited risk of short selling stock.