Put

Business, Legal & Accounting Glossary

Definition: Put



What is the dictionary definition of Put?

Dictionary Definition


  • A stipulated privilege of buying or selling a stated property, security, or commodity at a given price (strike price) within a specified time (for an American-style option, at any time prior to or on the expiration date). A securities option is a negotiable contract in which the seller (writer), for a certain sum of money called the option premium, gives the buyer the right to demand within a specified time the purchase (call) or sale (put) by the option seller of a specified number of bonds, currency units, index units, or shares of stock at a fixed price or rate called the strike price. Many options are settled for cash equal to the difference between the aggregate spot price and the aggregate strike price rather than by delivery of the underlying. In the U.S. and many other countries, stock options are usually written for units of 100 shares. Other units of underlying coverage are standard in other options markets. Options are ordinarily issued for periods of less than one year, but longer-term options are increasingly common.
  • Any financial contract that changes in value like an option (asymmetrically), even if the terms of the contract do not state the price relationship in terms of a right or privilege or in other language usually associated with options.

Full Definition of Put


In options trading, a put is a right, but not the obligation, to sell the underlying security at a specified strike before it expires and becomes worthless. A put is the opposite of a call, and is a bet that the underlying security will decrease in value. If the stock drops below the strike price, the put is in-the-money. A put is out-of-the-money when the value of the underlying security is higher than that of the strike price.

For example, an investor who wants to purchase a put option on XYZ, Inc. when its stock is trading at $42 in August might buy a September 40 put option for 100 shares. Assume the trader purchases the put option for $2 — the premium of the put option would be $2 X 100 shares or $200. If XYZ’s stock price falls to $35, the put option would be in-the-money for $5 ($40 minus $35) and the trader could sell his 100 shares of XYZ for $40, netting $500 from that transaction. However, the overall profit of the transaction would be $300 ($500 minus the $200 premium). On the downside, XYZ would need to drop to at least $38 for the put option to break-even. Further, if the buyer does not exercise the put option, the put option is said to expire worthless and the buyer of that put option would lose the entire premium of $200. The above example does not take into account the commissions required to execute the put option.


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Put. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/put/ (accessed: May 26, 2020).
American Psychological Association (APA):
Put. PayrollHeaven.com. Retrieved May 26, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/put/

Definition Sources


Definitions for Put are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 9th April, 2020 | 1 Views.