← BeginnerLesson 4 · 4:55
What is a put?
Summary
You can say what a put is: the right to sell something at a set price, up to a set date. You can use it as cover on a share you own, or hold it without shares as a bet on a fall. You can work out its result on the last day and say the most it can make and the most it can lose before you pay.
Key terms
- put
- The right to sell something at a set price, up to a set date; it gains as the stock falls.
- insurance
- betting on a fall
- capped gain
Check yourself
Answer each question to see why the right answer is right.
1. What is a put?
2. You own one share of XYZ at $100 and buy a put with a strike of $100 for $3.41. On the last day XYZ is at $70. What is your result on the two together?
3. You hold the same $3.41 put with no shares at all. XYZ falls a little, to $98. What is your result per share?
4. What is the most a put with a strike of $100, bought for $3.41, can make per share?
5. Do you have to own XYZ shares to hold a put on XYZ?
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