Long Put Option Explained
A long put option is the second most basic option contract that is traded. With this style of option contract you are expecting the underlying stock to make a dramatic move lower between now and expiration. With a long put option you have already agreed to sell the underlying stock at a predetermined price in the future, therefore if the stock is lower in the future you can theoretically buy the stock at the lower price and sell the stock to the other party in your transaction at the strike price of the option contract. This is one of the first and most elementary ways to profit from declining stock prices and is similar to shorting a stock, but requires much less capital upfront with less risk overall.