LONG PUT | bear strategy

Example: Buy put
Market Outlook: Bearish
Risk: Limited
Reward: Limited, but substantial
Increase in Volatility: Helps position
Time Erosion: Hurts position
Break-Even Point (BEP): Strike price minus premium paid

The long put option strategy is a basic strategy in options trading where the investor buy put options with the belief that the price of the underlying security will go significantly below the striking price before the expiration date.

Put buying is the simplest way to trade put options. When the options trader is bearish on particular security, he can purchase put options to profit from a slide in asset price. The price of the asset must move significantly below the strike price of the put options before the option expiration date for this strategy to be profitable.

Protective Puts - Investors also buy put options when they wish to protect an existing long stock position. Put options employed in this manner are also known as protective puts. Entire portfolio of stocks can also be protected using index puts.

Out-of-the-money Puts
Going long on out-of-the-money puts maybe cheaper but the put options have higher risk of expiring worthless.

In-the-money Puts
In-the-money puts are more expensive than out-of-the-money puts but the amount paid for thetime value of the option is also lower.

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