Option Strategies Details

Buy a Put
1. Speculate on a large, volatile price decrease
Up
Down
Strike Price minus Premium (debit) paid
Protective Call
Cost of the Put
same as Max Contract Loss
Long Put
You buy (long) a Put
Description
A trader who wants to speculate on a large, fast, and volatile price decrease can buy a Put. The trader pays a debit, called a premium, to buy the Put and has the right (but not the obligation) to sell 100 shares at the strike price.
Suppose stock XYZ is trading at $150. You forecast a large, fast decrease in XYZ price and you also forecast an increase in XYZ volatility.
You buy a $145 Put for $3 to express this view. Your breakeven XYZ price at expiry is $145 (strike price) - $3 (premium paid) = $142, but since the time component of your trade plan may not extend all the way to expiration you should be prepared to sell to close at a variety of XYZ prices as the market value of your $145 Put changes.