Futures and Options (12)

Put Options (1)

Investors buy put options to protect their investment portfolios from downside risk, or

to profit from expectations that the market of the underlying security will tumble.

For example, let's say you had bought 1,000 shares of YYY Company at $10 a share some time ago.

The price is now riding at $15 but you anticipate that the share price will drop sharply over the next few months.

However you don't want to sell your stock because you think the drop will be short-term, but you need to protect your investment against the decline.

Well, you could resort to buying options