Invest on your own
Build your own portfolio from a variety of products
Have experts invest for you
Invest in a portfolio built and managed by experts based on your preferences
Glossary
Put option
Definition
An opportunity to buy or sell an underlying instrument.
If you buy a put option, this means you have the right, but not the obligation, to sell the underlying instrument at the agreed strike price on the agreed expiry date (for a European option).
If you sell (write) a put option, this means you have the obligation to buy the underlying instrument at the agreed strike price on the agreed expiry date (for a European option), should the buyer choose to exercise it.
American options can be exercised at any time until the expiration date.
What is a put option?
A put option is a financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified time frame. It's a way to speculate on the decline of an asset's price or to hedge against a drop in the value of a holding.
Why are put options important to consider when trading?
Put options are important for traders as they provide a mechanism to profit from falling markets or to protect against losses in a declining market. They can be used as a form of insurance against a drop in the price of stocks in a portfolio. Understanding put options allows traders to make strategic decisions in bearish market conditions and manage risk effectively.