Buy a put: a bet on a clear drop. Max loss = the premium. Max profit = strike price − premium.
The structure
A Long Put (Long Put) is the bearish counterpart: one contract that gives you the right to sell 100 shares at the strike price. You profit as the stock falls below the strike by more than the premium, and your maximum loss is the premium itself.
Two different uses
The first is an outright bearish bet in place of short selling, with a capped loss. The second is a hedge: someone who owns shares and fears a temporary drop buys the right to sell as short-term insurance without selling the position (that is the basis of the Protective Put).
Maximum profit and loss
Profit grows as the stock falls, up to a theoretical ceiling if the stock reaches zero, and the loss is capped at the premium. Breakeven: strike minus premium.
Hypothetical example
A stock at $80 and a put with a $75 strike and a $1.50 premium: breakeven is $73.50. The stock collapses to $60: intrinsic value is $15 and the net profit on the contract is $13.50 per share. The stock holds above $75: the premium simply expires worthless.
Common mistake
Buying protection after the news hits, not before: Implied Volatility has already swollen, so the late buyer pays for expensive insurance that melts away at the first calm, even if the direction was right.
What you are actually buying
The right to sell at a set price is either insurance against a fall or a bet on one. The difference is the context, not the tool. If you own the asset, you buy protection at a known cost. If you don't, you bet on a drop with a loss capped at the premium, instead of an open-ended short sale.
Where to see it on the platform
The options calculator works it out in full, and the flow tools show when demand for puts piles up in the market, which is the signature of collective demand for protection.
The calculator works out its breakeven and limits, and the strategy guide separates its use as protection from its use as a bet.
