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Put option
A put option is a contract giving its buyer the right, but not the obligation, to sell an asset at a fixed strike price on or before an expiry date. The buyer gains if the price falls far enough below the strike to cover the premium paid.
What it means for you. Holders of an asset sometimes buy puts as insurance against a fall; the cost is the premium, lost entirely if the price stays above the strike. A put seller collects the premium but must buy at the strike even if the asset has collapsed.
Sources: SEC Investor Bulletin: An Introduction to Options, CFTC Glossary · checked 4 October 2026
Short selling
Short selling is selling an asset you do not own, usually borrowed, hoping to buy it back later at a lower price. If the price falls, the short seller keeps the difference; if it rises, they lose, and there is no ceiling on how high a price can go.
What it means for you. A short position's possible loss is unlimited, because a price can keep rising. You pay interest or fees on what you borrow for as long as the position is open, and a sharp rise can bring a margin call or a forced buy-back at the worst moment.
Sources: SEC Investor Bulletin: An Introduction to Short Sales, CFTC Glossary, FINRA: Know What Triggers a Margin Call · checked 4 October 2026