what is a long put 
a long put refers to buying a put option typically in anticipation of a decline in the underlying asset the term long here has nothing to do with the length of time before expiration but rather refers to the trader s action of having bought the option with the hope of selling it at a higher price at a later point in time a trader could buy a put for speculative reasons betting that the underlying asset will fall which increases the value of the long put option a long put could also be used to hedge a long position in the underlying asset if the underlying asset falls the put option increases in value helping to offset the loss in the underlying understanding a long puta long put has a strike price which is the price at which the put buyer has the right to sell the underlying asset assume the underlying asset is a stock and the option s strike price is 50 that means the put option entitles that trader to sell the stock at 50 even if the stock drops to 20 for example on the other hand if the stock rises and remains above 50 the option is worthless because it is not useful to sell at 50 when the stock is trading at 60 and can be sold there without the use of an option if a trader wishes to utilize their right to sell the underlying at the strike price they will exercise the option exercising is not required instead the trader can simply exit the option at any time prior to expiration by selling it a long put option may be exercised before the expiration if it s an american option whereas european options can only be exercised at the expiration date if the option is exercised early or expires in the money the option holder would be short the underlying asset long put strategy vs shorting stocka long put may be a favorable strategy for bearish investors rather than shorting shares a short stock position theoretically has unlimited risk since the stock price has no capped upside a short stock position also has limited profit potential since a stock cannot fall below 0 per share a long put option is similar to a short stock position because the profit potentials are limited a put option will only increase in value up to the underlying stock reaching zero the benefit of the put option is that risk is limited to the premium paid for the option the drawback to the put option is that the price of the underlying must fall before the expiration date of the option otherwise the amount paid for the option is lost to profit from a short stock trade a trader sells a stock at a certain price hoping to be able to buy it back at a lower price put options are similar in that if the underlying stock falls then the put option will increase in value and can be sold for a profit if the option is exercised it will put the trader short in the underlying stock and the trader will then need to buy the underlying stock to realize the profit from the trade long put options to hedgea long put option could also be used to hedge against unfavorable moves in a long stock position this hedging strategy is known as a protective put or married put for example assume an investor is long 100 shares of bank of america corporation bac at 25 per share the investor is long term bullish on the stock but fears that the stock may fall over the next month therefore the investor purchases one put option with a strike price of 20 for 0 10 multiplied by 100 shares since each put option represents 100 shares which expires in one month the investor s hedge caps the loss to 500 or 100 shares x 25 20 less the premium 10 total paid for the put option in other words even if bank of america falls to 0 over the next month the most this trader can lose is 510 because all losses in the stock below 20 are covered by the long put option example of using a long putlet s assume apple inc aapl is trading at 170 per share and you think it s going to decrease in value by about 10 ahead of a new product launch you decide to go long 10 put options with a strike price of 155 and pay 0 45 your total long put options position outlay cost is 450 fees and commissions 1 000 shares x 0 45 450 if the share price of apple falls to 154 before expiry your put options are now worth 1 00 since you could exercise them and be short 1 000 shares of the stock at 155 and immediately buy it back to cover at 154 your total long put options position is now worth 1 000 less any fees and commissions or 1 000 shares x 1 00 1 000 your profit on the position is 122 1 000 450 450 going long put options allowed you to realize a much greater gain than the 9 4 fall in the underlying stock price alternatively if apple shares rose to 200 the 10 option contracts would expire worthless resulting in you losing your initial outlay cost of 450 