Put Option
Definition
A contract giving the holder the right to sell a specified quantity of an underlying asset at a predetermined price before expiration.
Explanation
Put options increase in value when the underlying asset's price declines. Buying puts is the most common way to hedge a stock portfolio — a protective put acts like insurance against a stock decline. The maximum loss is the premium paid. Put sellers (writers) are obligated to buy the stock at the strike price if exercised — they collect premium but face significant downside risk. Put-call parity establishes the mathematical relationship between put prices, call prices, and the underlying stock price.
How Stoquity Uses This
Stoquity incorporates put option analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.