Purchasing a put is similar to selling a stock short. Both positions anticipate that the price of the stock will fall.

Question

Purchasing a put is similar to selling a stock short. Both positions anticipate that the price of the stock will fall.​

Quizplus · Accepted Answer

Both purchasing a put and selling a stock short are bearish strategies that anticipate the price of the stock to decline. When you purchase a put, you have the right to sell the stock at a specific price, which means you profit if the stock price falls. When you sell a stock short, you borrow the shares and sell them, expecting to buy them back at a lower price and profit from the difference. While they have some differences, both strategies aim to profit from a decrease in the stock price.

Purchasing a Put Is Similar to Selling a Stock Short