A long put profits when the stock falls. It's how you bet against a stock — or protect one you already own — with a fixed, known cost.
Buying a put option gives you the right to sell 100 shares of a stock at a specific price (the strike price) before expiration. If the stock drops below the strike price, the put gains value. If the stock stays above the strike, the put expires worthless and you lose the premium.
This is the most straightforward way to profit from a stock declining. Unlike short selling, a long put has a defined maximum loss: the premium you paid.
Maximum profit: Strike price minus premium paid, multiplied by 100. The stock can only fall to $0, so profit is capped. In the example: ($95 − $3.00) × 100 = $9,200.
Maximum loss: The premium paid. In the example, $300.
Breakeven at expiration: Strike price minus premium. In the example: $95 − $3.00 = $92.00.
A long put works best when you expect a meaningful drop in the stock before expiration. It also works well for hedging an existing stock position — buying a put on stock you own creates a protective put that limits your downside.