Bearish options strategy
Long put
Pay a premium for the right to sell 100 shares at the strike. Profits if the stock falls enough before expiry.
BearishLow IV (buying cheap premium)Defined riskLevel 3 · Buying options
Long put payoff
An example on a $100 stock with 30% implied volatility. The dashed line is the profit or loss at expiry; the solid line is what the position is worth today.
The trade
Buy 1 $104 put · 45 days · $6.24
Net debit $624
Max profit$9,776
Max loss−$624
Break-even$97.76
Chance of profit42%
How it works
- You buy one put. The most you can lose is the premium.
- At expiry you profit below strike − premium paid.
- The most you can make is if the stock goes to zero: strike − premium, per share.
When to use it
- You expect a drop and want limited risk compared with shorting the stock.
- You want to hedge shares you own (see protective put).
Managing the trade
- Puts on stocks are usually priced at higher volatility than calls (skew), so they cost more.
- Close early if the move happens; time decay speeds up in the last 30 days.
Risks
- Losing the whole premium if the stock stays above the strike.
- Volatility usually falls when markets rise, hurting the put twice.