Buying a put option is a powerful bearish strategy used by investors to profit from a stock's decline or to "insure" their existing portfolio. Unlike buying a stock where you want the price to go up, buying a put option increases in value as the underlying asset’s price drops. What is a Put Option?

The set price at which you can sell the stock, regardless of its current market value.

The cost you pay to buy the option; this is also your maximum potential loss.

When you buy a put, you are essentially betting that the stock price will fall below the strike price before the expiration date. Example: Speculating on a Drop

This right is valid only until the contract's . To acquire this right, the buyer pays an upfront fee called a premium . Key Terminology

The security (stock, ETF, or index) the option is based on.