Long Put
A bearish strategy where you buy a put option to benefit from a downward move with limited downside (premium paid).
When to use
- You expect a down move in the underlying
- You want limited downside
- You may also use it as a hedge for a long portfolio
Payoff
Payoff (conceptual)
| Outcome at expiry | What happens |
|---|---|
| Underlying ≥ strike | Option expires; loss ≈ premium |
| Underlying < strike | Profit increases as price falls (after breakeven) |
Tip
As a hedge, consider sizing the put so the premium cost is acceptable relative to your portfolio risk.
Practical deep‑dive
Info
Profile
Best suited for a bearish or mildly bearish view.
Strategy snapshot (quick)
| Field | Value |
|---|---|
| Style | single long |
| Cost type | Typically a debit-style structure (you pay premium). |
| Best when | You have direction + timing conviction and want strictly limited downside (premium). |
| Watch out | Theta decay and IV crush can reduce premium even if direction is right. |
Greeks to watch
Focus on these exposures first
| Greek | Why it matters |
|---|---|
| Delta | Directional exposure |
| Theta | Time decay (especially near expiry) |
| Vega | Premium sensitivity to IV |
Professional options traders focus on “structure first”: define risk, choose strikes/liquidity, and write down exit rules before entry. Most losses come from oversized positions and holding short-dated options without a plan.
Execution checklist
Use this before placing the trade
| Check | Why it matters | Quick test |
|---|---|---|
| Liquidity | Spreads can eat edge | Tight bid‑ask + decent volume/OI |
| Risk defined | Prevents blow-ups | Max loss is known and acceptable |
| Time horizon | Avoid time mismatch | Expiry matches your view timeframe |
| Volatility regime | Premium cost changes outcomes | IV not extreme vs recent range |
| Exit plan | Stops emotional decisions | Target/stop/time exit written down |
Mistakes to avoid
- Trading illiquid strikes (wide spreads) because premium looks “cheap”.
- Using market orders during fast moves and getting poor fills.
- Adding to losing positions without a predefined rule.
- Ignoring event risk (results, policy events) near expiry.
- Overusing weekly expiries before mastering risk control.
Summary (takeaways)
- Prefer defined-risk structures while learning.
- Liquidity and execution quality matter as much as strategy selection.
- Consistency comes from process, not predictions.