Long Put

A bearish, defined-risk strategy that profits as the stock falls · payoff at expiration

Worked example

Buy 1 × $100.00 put for $5.00 per share — a $500.00 debit, which is also the most you can lose (max loss -$500.00). The position breaks even at $95.00 (strike − premium); below that it profits as the stock falls toward zero.

At expiration: if the stock is at $80.00, the position shows a net P&L of $1,500.00; if the stock is at $100.00, the position shows a net P&L of -$500.00.

When to use

You expect the underlying to fall meaningfully before expiration.
You want defined, limited risk — the most you can lose is the premium — while profiting as the stock drops.
You prefer a put's leverage and capped risk to short-selling the shares outright.

Common pitfalls

Time decay works against you: the option loses value as expiration nears if the stock doesn't move.
You can lose the entire premium even on a decline, if the stock finishes above the breakeven.
A drop in implied volatility can erode the option's value even when the stock moves your way.
Maximum profit is capped — the stock can only fall to zero — unlike a long call's unlimited upside.