Long Put Options Strategy — Guide, Profit & Calculator

A long put is the basic bearish options strategy, involving the purchase of a put option. This gives you the right to sell 100 shares at a fixed strike price until expiration, allowing you to profit from significant downward price movements with defined, limited risk.

Use the interactive chart below or jump to the setup guide to understand strike selection and risk management for your bearish thesis.

Interactive Payoff Chart

When to Buy Put Options

• Outlook: Strongly bearish; expecting significant downward price movement.
• Catalysts: Earnings misses, negative guidance, or technical breakdowns.
• Volatility: Best bought when IV is low relative to expected future volatility.
• Market environment: Rising interest rates, economic uncertainty, or sector weakness.

Setup: Strike Selection & Expiration

Strike Selection

1. At-the-money (ATM): Balanced cost and delta exposure.
2. Out-of-the-money (OTM): Lower cost but requires larger moves.
3. In-the-money (ITM): Higher cost but more intrinsic value protection.
4. Target-based: Choose strikes that align with your downside target.

Expiration

• 30–90 DTE balances time value and theta decay.
• Align expiration with expected catalyst timing.
• Consider upcoming earnings or events that may trigger moves.

Risk Sizing

Max loss equals the premium paid. Risk only 2-5% of portfolio on any single option position due to binary nature of outcomes.

Looking for optimal strikes? Try the Long Put Calculator to compare probabilities and expected returns.

Payoff, Breakeven & Greeks

• Max Profit: Strike price minus premium paid (occurs if stock goes to $0).
• Max Loss: Premium paid (plus fees).
• Breakeven: Strike price minus premium paid.

Greeks (at inception)

• Delta: Negative; increases in magnitude as stock price falls.
• Theta: Negative; time decay accelerates near expiration.
• Vega: Positive; benefits from rising implied volatility.
• Gamma: Highest near ATM; increases delta sensitivity.

Management & Exits

• Profit taking: Consider selling at 50-100% gains to lock in profits.
• Stop losses: Cut losses around 50% of premium to preserve capital.
• Time-based: Avoid holding through final week unless deeply ITM.
• Rolling: Extend time or adjust strike if thesis remains intact.

Worked Example (Illustrative)

Stock at $100. Buy the $95 put for $3.00 with 60 days to expiration.

• Max profit: $92 per share if stock goes to $0 ($95 - $3).
• Max loss: $3.00 per share ($300 per contract).
• Breakeven: $92 at expiration.

If stock falls to $85, option worth ~$10 (233% gain). Use the calculator to model scenarios before entering positions.

Frequently Asked Questions

Disclaimer

This page is for educational purposes only and is not investment advice. Options involve risk and are not suitable for all investors. Consider consulting a qualified professional. Examples are illustrative and exclude fees/slippage.

Sources & further reading: Cboe Options Education · OCC Investor Resources