If you own 100 shares of a company and fear a market dip, buying a put acts as a floor. If the stock plummeted, you could still sell your shares at the strike price, limiting your total losses. 2. Speculation (Profiting from a Drop)
When you buy a put, you are "long" the option and "short" the underlying stock's direction. The upfront cost you pay to buy the option. buying put options explained
Stock XYZ drops to $80. You can sell at $95. Your profit is $13 per share ($15 gain minus the $2 premium). If you own 100 shares of a company
Think of it like an insurance policy for your stocks. You pay a small fee now to lock in a minimum selling price later. How a Put Option Works buying put options explained