Put

A put is a type of options contract. Buying a put gives you the right, but not the obligation, to sell a specific stock (or other underlying asset) at a set price, called the strike price, before or on a certain expiration date. You pay a fee, called a premium, to buy this right.

Here's how it works in practice: if you think a stock is going to fall, you can buy a put instead of shorting the stock directly. Say a stock trades at $50 and you buy a put with a $50 strike expiring in a month. If the stock drops to $40, your put lets you sell at $50 even though the market price is only $40, so the put itself becomes valuable and you can sell that put contract for a profit, or exercise it to sell the stock at the higher strike. If the stock instead rises or stays flat, the put can expire worthless, and your loss is limited to the premium you paid.

The nuance that trips people up is direction and who holds which side. Buying a put is a bet that the price will fall, it profits from a decline, which is the opposite of buying a call, which profits from a rise. But there is also the other side of the trade: someone who sells (or "writes") a put is taking on the obligation to buy the stock at the strike price if the buyer chooses to exercise it, and that seller is actually betting the price will stay flat or rise. So "put" alone does not tell you if someone is bullish or bearish, you also need to know whether they bought or sold it.

Another common confusion is mixing up the right to sell (a put) with the right to buy (a call). A simple way to remember it: a put lets you "put" the stock onto someone else at a fixed price, while a call lets you "call" the stock away from someone at a fixed price.