How to Buy and Sell Put Options (SPY Example)

Buy put option na wetin give you right to sell 100 shares of one stock for one fixed price (wey dem dey call strike price), any time before the option expire. You go pay premium first before you fit hold that right, and that premium na the highest money wey you fit lose. To sell one put wey you don already own, dem dey call am selling to close, and e mean say you dey give that same contract back to market before the option expire, then you go collect wetin e be worth for that moment.

This post go follow one real contract from beginning to end: the SPY $740 put wey go expire on June 18, 2026. If you watch how e dey move, you go learn every part of the round trip.

Wetin happen when you buy put option

When you buy put, three numbers don define the trade before e start.

• The premium na wetin you pay. For Jun 4 this SPY put close at $2.75, with SPY stand at $754.56, well above the $740 strike. The put be pure bet say SPY go fall.
• The maximum loss na that premium, and nothing more. Buy the put for $2.75 and the worst case na the $2.75 wey you pay, no matter how high SPY climb. Long put no fit cost you pass wetin you put inside.
• The breakeven at expiry na the strike minus the premium. Pay $2.75 for the $740 put and the position go turn profit for expiration only when SPY dey below the $740 strike by more than that premium. If e dey above, the put go expire worthless.

Long put be insurance wey get expiry date. You pay known amount for the right to sell for $740, and the clock dey always run against you.

The round trip: one real SPY put

See the life of dis put, from deep in-the-money for early May reach im last week:

SELECT date,
       formatDateTime(date, '%b %e') AS label,
       round(avg(option_close), 2) AS put_price
FROM global_markets.options_greeks
WHERE ticker = 'O:SPY260618P00740000'
  AND date BETWEEN '2026-05-01' AND '2026-06-15'
  AND implied_volatility > 0.02
GROUP BY date
ORDER BY date

And the stock wey e dey track, over the same weeks:

SELECT date,
       formatDateTime(date, '%b %e') AS label,
       round(avg(underlying_close), 2) AS spy_price
FROM global_markets.options_greeks
WHERE ticker = 'O:SPY260618P00740000'
  AND date BETWEEN '2026-05-01' AND '2026-06-15'
  AND implied_volatility > 0.02
GROUP BY date
ORDER BY date

Read the two charts together. For May 1 the put worth $23.05, with SPY down at $720, below the $740 strike, and the put carry real intrinsic value. As SPY climb through May go im $759.63 high for Jun 2, the put melt to $2.79. Put dey lose value as the stock rise above the strike.

Then SPY turn. From $754.56 for Jun 4 the stock fall to $722.88 by Jun 10, back below the strike. Over those same sessions the put run from $2.75 to $18.7. Contract wey person buy at $2.75 worth $18.7 one week later.

Selling to close vs. to leave am to decay

The gain for Jun 10 na only real if you do sometin about am. Selling to close mean say you sell the put back to market that same day and you pocket the $18.7 wey e be worth. You no go ever own or deliver any single share; you just commot from the contract.

If you hold am instead, two tin dey work against the put once the stock recover. SPY rally from $722.88 back to $753.91 by Jun 15, and the stock don lift above the strike again. At the same time, every day wey pass dey drain the option remaining time value — na dis effect the greeks dey call option theta. By Jun 15, the put wey don peak at $18.7 don drop to $1.16. The paper gain from Jun 10 don finish.

The lesson no be say holding na mistake. A long option value na moving mark, and the profit dey only as long as the contract dey. An option expiration date na the deadline, and inside every session, decay dey work against the buyer.

Buying puts for protection versus speculation

The same contract dey serve two different purposes.

Speculation na the trade wey dey up: buy the put outright as a bet say SPY go fall, you dey risk the premium to capture the decline. The buyer for Jun 4 pay $2.75 for pure directional exposure.

Protection flip the intent. An investor wey don already hold SPY shares fit buy the same $740 put as insurance. When SPY drop, the shares go lose value while the put go gain, offsetting the fall below $740. The put $18.7 peak for Jun 10 coincide with SPY dey trade at $722.88, well under the $740 strike. A protective put pay exactly when the portfolio dey hurt. The premium na the cost of that coverage, and e dey decay the same way whether you hold the put for insurance or for profit.

How expensive that insurance dey run for any moment turn on implied volatility, the market priced-in expectation for how much the stock go move. Fear dey raise put premiums; calm dey lower dem.

FAQ

Wetin be the highest loss when you buy put?

The premium wey you pay, and nothing more. Long put no fit lose pass im own cost, no matter how far the stock go up. The SPY put wey dey above cost $2.75 for Jun 4, so $2.75 na the whole risk.

Wetin e mean when you sell to close put?

E mean say you dey sell one put wey you already own back to the market before expiration, to collect the value wey e get now. You dey close the position, you no dey open new short one. Anybody wey sell to close for Jun 10 go bank the $18.7 wey the contract worth that day.

How you go calculate breakeven for long put?

Subtract the premium from the strike. For $740 put wey dem buy for $2.75, the position go turn profitable for expiry only when the stock fall below the $740 strike by more than that premium. Above the strike, the put go expire worthless and the buyer go lose the premium.

Why the put lose almost all im value by the last day?

Two things move against am at once. SPY rally from $722.88 back above the $740 strike, and time decay drain the remaining value of the option as June 18 dey come. By Jun 15 the put worth $1.16.

To buy put na the same thing like short selling?

No. Long put risk only the premium and e last until expiration, but short stock position carry unlimited loss and no expiry. The put give you defined-risk downside exposure; short selling no do that.

Run this contract full history yourself for the Strasmore terminal and watch the round trip session by session.