Puts are, simply put, insurance (pardon the pun). You pay a premium for the <i>option</i> to sell the stock to someone at $X at a future date. Let&#x27;s say you think that AAPL is going to go down in price. You could for example buy a put option to have the option to sell AAPL stock at $118.28, in 6 months, to the person who sold you that option. If the stock goes up, you don&#x27;t exercise the option. If it does, the option writer (guy who sold it to you) pays you the difference between the stock price at that time, and $118.28. The only cost to a put option is the premium (maybe a few dollars, depending on the forecasted price of the stock and forecasted interest rates) that you paid at time 0. So if you paid $10 for the option, and the stock goes down to $105, your total cashflow is +$3.28. If the stock went up to $200, your total cashflow is -$10.