Long Puts

Put buying, like Call buying, is a directional option strategy. While XYZ must rally in order for a long Call position to become profitable, XYZ must decline in price in order for a long Put position to become profitable.

Speculator? Hedger? As with Call buyers, Puts are purchased for a variety of reasons. An option strategy by itself in neither speculative nor conservative.

Why it is selected and how it is managed dictate its risk/reward profile.

Opinion: Bearish.

Example: Long 1 XYZ Oct 60 Put.

Description: Put buying is a strategy used if the investor thinks that XYZ will decline in price. It is often used in place of a short sale in XYZ stock.

The speculative Put buyer looks for leverage, emphasizing the number of options he or she can purchase. The “insurance” Put buyer looks to protect a long position in the stock for a period of time covered by the option.

The speculative Put Buyer:

The purchase of a Put option provides leverage to the bearish speculator in the same way that a Call option provides leverage to the bullish speculator.