You think a stock is heading down. You want to profit from that decline — but you don't want unlimited exposure if you're wrong. A long put gives you exactly that: a defined bet on the downside, with a loss that's capped at what you paid to enter.
Here's how it works.
What is a long put?
A long put gives you the right — but not the obligation — to sell a stock at a specific price (the strike price) on or before a set expiry date. You pay a premium upfront to buy that right. That's your maximum possible loss, no matter what the stock does.
If the stock falls, your put gains value. If the stock rises instead, you simply lose the premium you paid. Nothing more.
Legs of the trade: 1 (long put) Sentiment: Bearish
A real example (with fake numbers)
Let's say Jill has been following PEAR stock, currently trading at $50 per share. She thinks it's heading lower — but she knows she could be wrong, and she doesn't want to take on unlimited risk by shorting the stock outright. A long put fits.
Here's what she does:
Buys 10 PEAR January 50 puts at $1.30 each
Her total upfront cost — and maximum possible loss — is $1,300 (10 contracts × 100 multiplier × $1.30).
The best case: maximum profit
The further PEAR falls, the more Jill's put is worth. Her profit potential is significant, but not unlimited — a stock can only fall to zero. Still, that's a long way to fall.
Question: PEAR drops to $46 per share. What's Jill's unrealized profit (before fees and commissions)?
Answer: $2,700
Strike price ($50) – current stock price ($46) – net premium paid ($1.30) = $2.70 per share
$2.70 × 10 contracts × 100 multiplier = $2,700
The worst case: maximum loss
PEAR went up instead of down. Jill's thesis was wrong — but because she used a long put instead of shorting the stock, her loss is capped at the premium she paid. That's the built-in protection of this strategy.
Question: PEAR rises to $52 per share. What's Jill's loss (before fees and commissions)?
Answer: –$1,300
The put expires worthless. Jill loses only what she paid upfront.
$1.30 × 10 contracts × 100 multiplier = –$1,300
The break-even
Question: What's Jill's break-even price per share?
Answer: $48.70
Jill paid $1.30 for the put. She needs PEAR to fall by at least that much from the strike price to recover her cost. Below $48.70, she's in the money.
$50 – $1.30 = $48.70
What Jill is actually hoping for
She wants PEAR to drop — and drop meaningfully. The ideal outcome is a sharp decline well below the strike price, easily offsetting what she paid for the contract. The bigger the move, the better the payoff. But even if she's slightly wrong on direction or timing, her loss stays capped at $1,300.
The main risk: premium paid
The only thing Jill can lose here is what she paid to enter the trade. If PEAR stays flat or climbs, the put loses value and eventually expires worthless. Time is working against her — the longer PEAR takes to move, the more of her premium erodes. That's worth keeping in mind when choosing an expiry date.
Putting it all together
A long put is one of the most straightforward ways to express a bearish view with defined risk. You're not exposed to a short squeeze or runaway losses — just the premium you paid on day one. For investors who think a stock is overdue for a pullback but want to keep their downside controlled, it's a clean, direct tool.
Now, explore how strategies like bear put spreads let you reduce the cost of a long put by giving up some of the downside profit potential.