The Long Put: The Simplest Bearish Options Trade

A long put is a bearish bet with defined risk. You pay a premium today for the right to sell 100 shares at the strike before expiration. Max loss is the premium paid. Max gain is the strike price minus premium (capped only by the stock going to zero).

Two distinct uses: directional bearish speculation and portfolio insurance. The speculative version is symmetric to a long call — buy 0.50–0.70 delta puts at 30–60 DTE on a stock you have a bearish thesis on, exit at 50–100% profit or 50% loss. The insurance version (the protective put) is bought against a stock you already own, hedging downside while leaving upside intact. The two use cases share mechanics but have different position-sizing logic.

Be aware that puts trade with a volatility skew — OTM puts on equity indexes are typically more expensive than the symmetric OTM call because institutional hedgers bid up downside protection. That skew is real edge for sellers and a real cost for buyers. Account for it before you place the trade, not after.

Frequently Asked Questions

When does a protective put make more sense than a stop-loss order?

When you want to hold the stock through volatility but cap your downside, when you want to hedge over an earnings event, or when a stop-loss might trigger on a flash dip.

Why are OTM puts more expensive than equivalent OTM calls?

Volatility skew. Institutional hedging demand for downside protection bids up put IV relative to call IV on most equity indexes.

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