Long put
Also known as: long put option, buying a put
A long put is an options position created by buying a put contract, giving the holder the right to sell 100 shares of the underlying stock at the strike price before expiration. It is a bearish strategy that profits when the stock falls.
Going "long a put" means buying a put option. In exchange for paying a premium, the holder gains the right — but not the obligation — to sell 100 shares of the underlying stock at the strike price any time before the contract expires. Because the position gains value as the stock declines, a long put is the classic bearish options strategy.
Consider an investor who buys 1 XYZ Oct 50 put for a premium of $3 ($300 total). If XYZ falls to $40, the investor can buy shares in the market at $40 and exercise the right to sell them at $50, capturing $10 per share minus the $3 premium — a $700 profit. The breakeven point is the strike price minus the premium ($47 here). Maximum loss is the $300 premium paid, while maximum gain is $4,700, reached if the stock falls all the way to zero.
Long puts serve two main purposes: outright speculation on a decline, and protection. An investor who owns the underlying stock can buy a put as insurance — a "protective put" — locking in a minimum sale price while keeping unlimited upside. Compared with short selling, a long put offers similar bearish exposure with strictly limited risk.
Options strategies are tested heavily on the securities exams. The SIE, Series 7, and Series 9 all cover long puts — expect to calculate maximum gain, maximum loss, and breakeven, and to build on this foundation with put spreads and hedged positions.
Key takeaways
- A long put gives the buyer the right to sell 100 shares at the strike price before expiration.
- It is a bearish position: maximum loss is the premium paid, and maximum gain occurs if the stock falls to zero.
- Breakeven equals the strike price minus the premium.
- A put bought against stock you own (a protective put) acts as insurance by locking in a minimum sale price.
- Exams routinely test the max gain, max loss, and breakeven math for long puts.