What Is a Long Put Option? | Beginner's Guide
Long put options explained visually—payoff diagrams, Greeks tables, and examples showing how the strategy works.
A long put option is buying a put—giving you the right (but not the obligation) to sell 100 shares of the underlying stock at a predetermined strike price at or before expiration. This strategy provides leveraged bearish exposure while limiting your risk to the premium paid.
Long puts work best when you’re bearish and expect a large move lower within a specific timeframe, want to express conviction with leverage, are positioning ahead of catalysts, or hedging a stock portfolio.
Payoff Diagram
Every long put option has the same payoff structure at expiration: limited loss above the strike price, then rising linearly below the strike price (like short stock on the downside):
Stock Price: $105. Put Strike: $100. Premium: $3.32 ($332 total). Breakeven at $96.68. 60 days to expiration (DTE).
The white line shows the long put’s payoff at expiration. If the stock price is at or above the strike of $100, the put expires worthless, but the risk is defined to the entry premium of $332.
The cyan line (Today - 60 DTE) shows the long put’s payoff at trade entry. If the stock makes a big move lower right away, this line shows the put’s projected profit and loss.
The 30 DTE line shows the payoff halfway to expiration. The profits for a given movement are worse than at trade entry, showing how buying puts is a race against time.
Key Characteristics
- Max Profit: (Strike − premium) × 100 × number of contracts. Occurs if the stock falls to zero.
- Max Loss: Total premium paid. Occurs if the stock closes at or above the put strike at expiration.
- Breakeven: Strike - premium
- Outlook: Bearish
How the Greeks Affect a Long Put
| Greek | Long Put | What It Means |
|---|---|---|
| Delta (Δ) | Negative | Profits when the stock falls |
| Gamma (Γ) | Positive | Delta becomes more negative as the stock falls |
| Theta (Θ) | Negative | The position loses value each day |
| Vega (ν) | Positive | Profits when IV rises |
Long put options have negative exposure to delta and theta, and positive exposure to gamma and vega.
A put buyer profits when the stock price falls and/or volatility increases enough to offset time decay. In equity indices like SPY or QQQ, implied volatility typically surges when the market falls, making long puts an effective hedge when the broad market plummets.
Time Decay
Options lose some of their extrinsic value every day—this is theta decay. The chart below shows how an at-the-money put’s price falls as time passes:
Position: $100 stock, $100 strike, 30% IV, 60 DTE.
The chart assumes no stock price movement or change in implied volatility, which isolates the effect of time decay.
Buying puts has an asymmetric return profile—gains are virtually uncapped when the stock price falls, while risk is defined when the stock price rises. The cost of that return profile is time decay—the daily erosion of the option’s price if the stock doesn’t decrease.
Use the theta decay curve calculator to visualize the time decay of any option.
Implied Volatility
Implied volatility (IV) reflects the market’s expectation of future price swings. Rising IV means option prices are increasing as participants price in larger expected movements.
Long puts have positive vega, meaning they increase if implied volatility goes up, and decrease if implied volatility falls. The table below shows how a 1% change in IV affects the put price:
Buying puts is risky when IV is elevated—often after a large move lower in a short period. If you buy puts and IV collapses, you’ll lose money even if the stock price doesn’t move. And if the IV spike was caused by a collapse in the underlying, the IV will typically fall substantially if the underlying asset recovers. With negative delta and positive vega, this means a long put position will get destroyed if purchased during a decline with a spike in IV that’s followed by a recovery in the underlying and collapsing IV.
Choosing a Strike
Strike price selection affects cost, leverage, risk/reward, and probability of profit.
Consider a $100 stock with 30-day options and 25% IV:
The ITM put (110 strike) costs more than the ATM or OTM put, but it has $10 of intrinsic value and only $0.11 of extrinsic value, plus a high delta near -1.0 (mimicking short stock). The ATM and OTM puts have pure extrinsic value but cost less.
With ~$2,000 to allocate, you could buy two ITM puts, ~7 ATM puts, or 105 OTM puts. Compare the payoffs for each of these options assuming a $2,000 initial allocation and the stock falling to $85 at expiration:
| ITM Put (110) | ATM Put (100) | OTM Put (90) | |
|---|---|---|---|
| Entry Price | $10.11 | $2.67 | $0.19 |
| Contracts | 2 | 7 | 105 |
| Total Cost | $2,022 | $1,869 | $1,995 |
| Value/Contract at $85 | $2,500 | $1,500 | $500 |
| Position Value at $85 | $5,000 | $10,500 | $52,500 |
| Profit | +$2,978 | +$8,631 | +$50,505 |
| Return | +147% | +462% | +2,532% |
This is why aggressive traders favor ATM or OTM options—more leverage for the same capital.
But the cost of buying ATM or OTM options is full exposure to time decay and lower probability of profit compared to ITM.
Here’s the payoff for each of these options if the stock is exactly $100 at expiration in 30 days:
| ITM Put (110) | ATM Put (100) | OTM Put (90) | |
|---|---|---|---|
| Entry Price | $10.11 | $2.67 | $0.19 |
| Contracts | 2 | 7 | 105 |
| Total Cost | $2,022 | $1,869 | $1,995 |
| Value/Contract at $100 | $1,000 | $0 | $0 |
| Position Value at $100 | $2,000 | $0 | $0 |
| Profit | −$22 | −$1,869 | −$1,995 |
| Return | −1% | −100% | −100% |
Buying ATM or OTM puts offers massive return potential when the stock collapses during the trade, but lose 100% if the stock stays flat or increases.
The ITM puts provide less leverage, but have a much higher probability of profit since they start with intrinsic value and the stock needs to increase for them to expire worthless.
Choosing an Expiration
Your choice of expiration on a long put trade changes the risk profile.
Short-dated options (< 30 DTE):
- Cheaper in absolute terms
- Faster theta decay—time works against you aggressively
- Require precise timing
- Higher gamma: bigger swings in P/L from small moves
Medium-term options (60+ DTE):
- More expensive
- Slower theta decay—more forgiving if the move takes time
- Higher vega: more sensitive to IV changes
- Less leverage per dollar, but more time to be right
LEAPS (> 1 year):
- Highest cost but slowest decay
- Best for long-term bearish bets without precise timing
Match the expiration to your outlook. If you’re expecting a large move in the next week, short-dated options provide higher returns than longer-term puts at the same strike, but with less margin for error.
Long Puts as Portfolio Insurance
A long put can also serve as insurance for stock you already own—a strategy called a protective put. Instead of speculating on a decline, you’re paying to guarantee a sale price.
Example: You own 100 shares of a $100 stock and buy a $95 put for $2.00. No matter how far the stock falls, you can sell at $95. Your effective floor is $93 (strike minus premium). If the stock rises, you keep all the upside minus the $200 put cost.
The tradeoff: continuous hedging is expensive. Rolling protective puts every month can cost 50%+ annually on volatile stocks. Use it for strategic, short-term protection—not as a permanent hedge.
Long Put vs Short Stock
Long puts provide downside exposure similar to short stock, but without the unlimited loss potential on the upside:
Position: $50 Stock. $50 Put Strike. $2.50 Put Price.
The long put with a $50 strike price and $2.50 entry premium needs the stock to fall below $47.50 at expiration to profit. If the stock is $45 at expiration, the put is worth $5.00 and the trade return is +100%, while the shares only fell 10%.
On the upside, the put loses 100% of its value if the stock is above the strike at expiration, but losses are capped. The long put option offers limited risk since your max loss is the premium paid. A short stock position has unlimited risk—losses grow indefinitely as the stock price rises.
For traders wanting to express a bearish outlook without the undefined risk of short stock, the long put provides that.
Entry, Exit, and Expiration
To enter: Place a buy-to-open (BTO) order. Your buying power is reduced by the put premium immediately.
To exit before expiration: Sell-to-close (STC) to realize your P/L without exercising. Your account is credited with the sale proceeds.
If held through expiration:
- Put OTM (stock >= strike): Put expires worthless. Full premium loss.
- Put ITM (stock < strike): The put auto-exercises if ITM by $0.01 or more. You sell/short 100 shares per contract at the strike price.
Watch your buying power. If you hold 10 contracts of a $90-strike put and the stock is at $89 at expiration, auto-exercise means shorting 1,000 shares at $90/share:
$90 × 1,000 = $90,000 short stock position with a high margin requirement.
Allowing the puts to expire ITM means your defined risk position turns into an undefined risk position as the position transitions from a long put into short stock.
- A long put option is a bearish strategy that delivers leveraged downside exposure with limited risk.
- Max loss = premium paid. Max profit = strike price - premium. Breakeven = strike - premium.
- OTM puts are cheaper with higher leverage, but lose 100% if the stock doesn’t fall through the strike price.
- ITM puts cost more (less leverage), but include intrinsic value and have a higher probability of profit.
- Theta works against you—the stock must fall fast enough to offset time decay.
- Auto-exercise occurs for puts ITM by $0.01+ at expiration. This converts your long put into short stock—an undefined risk strategy.
- A long put option is a bearish strategy that delivers leveraged downside exposure with limited risk.
- Max loss = premium paid. Max profit = strike price - premium. Breakeven = strike - premium.
- OTM puts are cheaper with higher leverage, but lose 100% if the stock doesn’t fall through the strike price.
- ITM puts cost more (less leverage), but include intrinsic value and have a higher probability of profit.
- Theta works against you—the stock must fall fast enough to offset time decay.
- Auto-exercise occurs for puts ITM by $0.01+ at expiration. This converts your long put into short stock—an undefined risk strategy.
Related Guides
- What Is a Protective Put? — Use long puts as portfolio insurance
- What Is a Long Call? — Bullish counterpart to the long put
- What Is a Bear Put Spread? — Reduce cost by capping profit
- Call vs Put Options — Core differences explained
- What Is Delta? — How option prices change with the stock
- What Is Theta? — Understanding time decay
Ready to visualize your own put trades? Use our Long Put Calculator to model P/L for any long put position.
