CH.APTER 15 
Put Option Basics 
Much of the same terminology that is applied to call options also pertains to put 
options. Underlying security, striking price, and expiration date are all terms that 
have the same meaning for puts as they do for calls. The expiration dates of listed put 
options agree with the expiration dates of the calls on the same underlying stock. In 
addition, puts and calls have the same striking prices. This means that if there are 
options at a certain strike, say on a particular underlying stock that has both listed 
puts and calls, both calls at 50 and puts at 50 will be trading, regardless of the price 
of the underlying stock. Note that it is no longer sufficient to describe an option as 
an "XYZ July 50." It must also be stated whether the option is a put or a call, for an 
XYZ July 50 call and an XYZ July 50 put are two different securities. 
In many respects, the put option and its associated strategies will be very near­
ly the opposite of corresponding call-oriented strategies. However, it is not correct to 
say that the put is exactly the opposite of a call. In this introductory section on puts, 
the characteristics of puts are described in an attempt to show how they are similar 
to calls and how they are not. 
PUT STRATEGIES 
In the simplest terms, the outright buyer of a put is hoping for a stock price decline 
in order for his put to become more valuable. If the stock were to decline well below 
the striking price of the put option, the put holder could make a profit. The holder 
of the put could buy stock in the open market and then exercise his put to sell that 
stock for a profit at the striking price, which is higher. 
Example: If XYZ stock is at 40, an XYZ July 50 put would be worth at least 10 points, 
for the put grants the holder the right to sell XYZ at 50 - 10 points above its current 
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