Long Put Strategy
BearishBeginnerLimited Risk
The most basic bearish options strategy - buy a put option and profit from downward price movement.
Strategy Overview
Type:Single Leg
Outlook:Bearish
Risk/Reward:Limited Risk, High Reward
Complexity:Beginner
Description
A Long Put is a basic bearish options strategy where you buy a put option, betting that the stock price will fall below the strike price before expiration.
Setup
Buy Put Option
Strikes: At-the-money or out-of-the-money
Expiration: 30-60 days typically
When to Use
- •You expect the stock to decline significantly
- •You want downside protection without shorting stock
- •You want to leverage your capital for bearish exposure
- •You prefer defined maximum loss
Advantages
- +Limited risk (premium paid)
- +High profit potential if stock falls
- +No need to short stock or borrow shares
- +Leverage amplifies gains on downside
Disadvantages
- -Time decay works against you
- -Can lose 100% of premium
- -Requires directional accuracy
- -Affected by volatility changes
How It Works
1
Buy a Put: Purchase a put option at your chosen strike price and expiration date.
2
Pay Premium: The cost of the option is your maximum risk.
3
Profit on Decline: Make money when the stock falls below your breakeven point.
Key Metrics
Max Profit:Strike - Premium (if stock goes to $0)
Max Loss:Premium Paid
Breakeven:Strike - Premium
Best Case:Stock falls significantly
Worst Case:Stock above strike at expiration