Definition
A put option is a financial contract that gives the buyer the right, but not the obligation, to sell an underlying asset at a predetermined strike price before or at expiration. Investors buy puts when they expect the asset price to fall or want to hedge existing positions against downside risk.
Formula
Put Profit = Max(0, Strike Price - Stock Price) - Premium Paid
Example
You buy a put option on TSLA with a $200 strike price for $10 premium. If TSLA falls to $170, your profit is ($200 - $170) - $10 = $20 per share.
FAQ
What is Put Option?
A contract giving the holder the right to sell an asset at a specified price.
How do you calculate Put Option?
A common formula for Put Option is: Put Profit = Max(0, Strike Price - Stock Price) - Premium Paid
Why is Put Option important?
Put Option helps investors evaluate options and make more informed decisions.