Long Put

Psychology:

A long put is a strategy used to obtain profit from a decrease in an underlying asset’s share price. The long put is not ? The investor in a long put has the advantage of being able to close the option for the purpose of realizing a profit or preventing further loss of value. This provides the investor with a pad of protection from severe financial loss. The long put typically involves less financial investment at the start of the contract than shorting an asset. The good news about a long put is that as the amount of leverage increases, the option has the potential of rendering great financial rewards.

Risk / Reward:

Maximum Loss: Limited to the premium paid for the option contract.

Maximum Gain: Limited to the underlying asset’s share price reaching zero.