Buying Put Options Explained Apr 2026

Stock XYZ drops to $80. You can sell at $95. Your profit is $13 per share ($15 gain minus the $2 premium).

Buying a put option gives you the right, but not the obligation, to sell a specific stock at a predetermined price (the strike price) before a certain date (the expiration). buying put options explained

The price at which you can sell the stock. Stock XYZ drops to $80

Limited to the premium paid. If the stock stays flat or goes up, you only lose the money you spent to buy the option. Buying a put option gives you the right,

⚠️ To help you apply this to a specific trade or strategy: The ticker symbol you are watching (e.g., AAPL, SPY)

Unlike holding a stock forever, options have a "fuse." Every day that passes without a price drop reduces the value of your option. A Quick Example

The deadline. If the stock doesn't drop by this date, the option expires worthless.