For example, if you buy a put option, you pay a premium and someone promises you can sell them stock at a particular price in the future. Suppose you buy Facebook stock for $200 a share. You are optimistic about the company’s future but a little worried that it shares stories from dubious news sources, which might pose a risk that the stock price will fall one day. You can buy a put option that gives you the right to sell Facebook for $150 any time during the next six months. A put option offers insurance against the chance that Facebook’s stock price will tank.
