Put Option
An options contract giving the buyer the right to sell the underlying asset at the strike price before or on expiration.
Intrinsic Value = max(0, Strike Price − Spot Price)
A put option profits when the underlying falls below the strike price. The put buyer pays a premium for the right to sell — a bearish or protective position.
Intrinsic value at expiration is max(0, Strike − Spot). If spot is above the strike, the put expires worthless.
Puts are used to hedge long equity positions (see: protective put), express outright bearish views, or as components of spreads and condors.
On the desk
You own 100 shares of SPY at $520 and buy a 60-day $510 put for $4.50 ($450). If SPY drops to $490, the put is worth $20 at expiry — a $1,550 net gain on the put minus the premium, partially offsetting stock losses.