Glossary

Put option

Definition

An opportunity to buy or sell an underlying instrument.

If you buy a put option, this means you have the right, but not the obligation, to sell the underlying instrument at the agreed strike price on the agreed expiry date (for a European option).

If you sell (write) a put option, this means you have the obligation to buy the underlying instrument at the agreed strike price on the agreed expiry date (for a European option), should the buyer choose to exercise it.

American options can be exercised at any time until the expiration date.

What is a put option?

A put option is a financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified time frame. It's a way to speculate on the decline of an asset's price or to hedge against a drop in the value of a holding.

Why are put options important to consider when trading?

Put options are important for traders as they provide a mechanism to profit from falling markets or to protect against losses in a declining market. They can be used as a form of insurance against a drop in the price of stocks in a portfolio. Understanding put options allows traders to make strategic decisions in bearish market conditions and manage risk effectively.

Put this into Practice

    Saxo Capital Markets (Australia) Limited
    Suite 1, Level 14, 9 Castlereagh St
    Sydney NSW 2000
    Australia

    Contact Saxo

    Select region

    Australia
    Australia

    The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

    Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

    Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

    Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

    The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

    Please click here to view our full disclaimer.