Construction: Buy 1 put option.
When To Use: When you feel the price of the underlying stock will decrease by at least the cost of premium paid by the options expiration date.
Breakeven: The put options strike price minus the cost of the premium paid.
Max Gain: The maximum gain for a put option is the strike price minus the premium paid, as the price of the stock could fall to zero.
Max Loss: The strategy incurs losses when the put option closes above the buyers’ breakeven point (the options strike price minus the cost of premium).
Key Concepts: A Long Put is a bearish, single-option strategy that gives the buyer the right (but not the obligation) to sell 100 shares of the underlying stock on or before the options expiration date.
Example: Long the $100 strike put for a net debit of $5.00. The breakeven is the stock price closing at $95 by expiration. The stock must close below $95 at expiration to be profitable.