InsiderFlowGlossary › What is a put option?

What is a put option?

A put is the option granting the right to sell a security at a fixed price: it profits when the market falls.

You buy a put when you expect a decline, or to insure your portfolio: if the stock crashes, the put still guarantees you the strike price. It's the simplest way to protect yourself without selling your positions.

In the 2008 crash, whoever held puts on financial stocks — like the protagonists of "The Big Short" — turned disaster into enormous gains. The insurance has a price: in calm markets puts expire worthless, year after year.

Concrete example

You own shares at 100 and buy a 90-strike put for 3: if the stock crashes to 60, you still sell at 90. You paid 3 to insure against disaster.

How you see it in InsiderFlow

On InsiderFlow these concepts come alive on real data: what big funds and insiders are buying, explained every day.

Frequently asked questions

Is a put like short selling?

The goal is similar, the risk isn't: with a put you lose at most the premium; with a short, losses are unlimited.

What are protective puts?

Puts bought on stocks you own: insurance with a premium and a deductible, like car insurance.

Related terms

What is an option?What is a call option?What is short selling?