Puts offer you the right, but not obligation, to sell the underlying asset at the price it has at the purchase time of the contract, at any time before its expiry. Long puts means that you are assuming that the stock price will fall in the coming future, and that is why it is beneficial to sell it at the current price in order to make profit from the option.

A put option proves to be profitable when the underlying stock price decreases. The risk involved in put option is very less, thus this also adds to its benefits. We can say that a put option allows you to earn good profits out of the decreasing stock prices.

An investor who desires to get involved profitably with a falling downward price move in the underlying stock must opt for long puts. But before actually getting involved in puts, you must be very clear about the fundamentals of buying and holding put options.

An investor indulged in long puts option is purchasing puts without owning shares of the underlying stock. The basic motive of such an investor is to make financial benefits from a fall in the underlying security price. Such investors are interested in the monetary amount of his initial investment and the profits that long puts can offer rather than being interested in the number of contracts purchased. A careful and experienced investor is capable of choosing the right option for his investment so as to gain maximum profit.

A long put investor gets benefit of a least possible risk attached with the option. Just like in a long call, an investor buying and holding a long put has fixed restricted financial risk against the unlimited profit. No matter what is the market situation, a long put never needs a margin call. With the passage of time, the contract may become more profitable, thus filling your pockets with massive amount of money.

At any time before expiry of the option, the owner of a put option can sell it in the listed options marketplace to close the position. The owner may do this out of interest to gain profits in the option's premium or cut losses.

At the time of expiry of the option, most investors owing a long put option will prefer to sell it in the marketplace if it has value, that too before last trading day of the option ends. As an alternative to this, an investor can also purchase an equal number of shares in the marketplace, exercise the long put and finally sell them to a put writer at the selling price of the option. You may also use the put and sell the underlying stock, eventually setting up a short stock place in a suitable kind of brokerage account.

Prefer buying long puts under following circumstances:

(a)When you are confident that there is going to be a significant drop in the underlying stock value.

(b)When you want to avoid any loss that is possible due to fall in the value of the underlying stock.