A right (not an obligation) to sell 100 shares at a set price (the strike) before expiration. Profits when the stock falls below breakeven (strike − premium).
What this contract is
A Put Option (Put Option) is a contract giving its holder the right to sell 100 shares at the Strike Price until expiration: insurance against a drop, or a bet on one. Its value rises as the stock falls below the strike, the mirror image of a call option in every way.
Its two uses
The protection use: a stock owner buys the right to sell at a known price and caps his loss (the protective put), an insurance policy with a premium. The speculative use: a bearish bet with the loss limited in advance, cleaner than short selling, where the loss has no cap.
Its market mirrors fear
Demand for puts is the pulse of the need for insurance: Volatility Skew (puts priced richer than calls) and the flow of their premiums from fear gauges. A sudden surge in either sometimes comes before what the market actually fears.
Hypothetical example
A portfolio worth $100,000 and an owner worried about a stormy earnings season: he bought index puts struck 5% lower, costing 1% of the portfolio. The market fell 12% and the contracts offset about half the hit. If the drop never came? The premium was the price of a quiet night's sleep.
Common mistake
Buying protection at peak fear: after a crash, premiums are inflated by volatility. Insurance bought after the fire costs more and does less. Protection is bought cheap in calm markets, not expensive in the smoke.
Where to see it on the platform
The options chain shows it in full, and the Put Wall on the Gamma dashboard shows where protective positioning sits below the market.
