Are you bullish or bearish when you buy a put?

A put option is a financial instrument that grants the holder the privilege, but not the obligation, to sell a specified quantity of an asset, such as a stock, at a predetermined price within a given time frame. By acquiring a put option, the investor is essentially making a bearish prediction on the future value of the underlying asset.

Both put and call options are used by investors to hedge against potential losses or speculate on the future direction of an asset's price. By leveraging options, investors can gain exposure to an asset without having to tie up large amounts of capital in its purchase.

The exercise price of a put option is the agreed-upon price at which the underlying asset can be sold. If the market price of the asset falls below this exercise price before the option expires, the holder can exercise their right to sell the asset at the higher, predetermined price, thereby profiting from the difference.

In contrast, a call option represents a bullish bet on the future value of an asset. When an investor buys a call option, they are purchasing the right to buy a specified quantity of the underlying asset at a predetermined price within a specified time period.

The holder of a call option profits when the market price of the underlying asset rises above the exercise price. In this scenario, the investor can exercise their option to purchase the asset at the lower, predetermined price and then immediately sell it in the open market for a profit.