Even if you do not ever plan on buying a put, it is important to understand how they work as they serve as one of the four building blocks of numerous option strategies.
Put Buyer’s Rights: Gives the contract buyer the option of selling the stock in the future at a set price before the contract expires. Where call buyers have the right to buy a stock at a set price, put buyers have the right to sell a stock at a set price.
You are not forced to sell the stock in the future at $50, you simply have the right to do so if you so desire. Stock closes at $48: In this scenario you have the right to sell the stock at $50 even though the price of the stock is $48. Stock closes at $45: You make an even bigger profit as you still have the right to sell the stock at $50. The buying of put options can be a profitable means to take advantage of bearish market conditions.
Please call 1-800-978-8068 Option #1 to speak to a representative about the different options we offer for live and online training. Rich Dad Education elite trainings and mentoring offerings teach students strategies that can be applied to take advantage of bullish, bearish, and even stagnant markets.

They are simply an instrument you can use when you think you have an idea of where the market is heading. For example, a call buyer who bought a $50 call option has the right to buy that stock at $50 at any time before expiration.
If the stock continues to fall past the $50 area of support, then the put you purchased becomes more valuable. If you still hold your put option at expiration, then it will not have any value and you will lose the premium you paid for the option.
The ability to take advantage of various market environments gives knowledgeable traders a tremendous advantage over the common investor who traditionally simply buys a stock and holds it. You can buy a call option when the market is going to go up or buy a put option when the market is going to go down. For the put buyer that bought the same $50 put, they would have the right to SELL that stock at $50 any time before expiration.
In purchasing this put option you now have the option and right to sell 100 shares of stock at the price agreed upon before the contract expires. Conversely, if the stock rises in value, then you have no obligation to sell the stock at lower prices.

The next Rich Dad Education introduction to options article will focus on the technical setups that can make the buying of put options highly profitable.
The last article in this Rich Dad Education series on options discussed the buying of a call option, which can be used to take advantage of a bullish market.  Buying put options is a potential approach to take advantage of the bearish market environments that you will encounter. Naturally, there is a tad more that goes into your evaluation of the market’s direction, but that is the basic premise of buying puts. Because the put buyer has the right to sell the stock at $50, they naturally have reason to believe that the stock will go down in price before expiration. Your analysis of the chart shows that once the stock breaks the support of this $50 barrier, there could be significant movement downward.
In many cases, the put buyer owns the stock and wants to hedge a loss through the purchase of puts.

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