Buying a put option (i.e., a long put position) is mainly a bet that the underlying price is going to drop. As the stock price drops below the strike price, the value of the put goes up, and vice versa. Selling stock short involves selling a stock that an investor doesn’t own, but rather borrows from a holder, in the hope that he will be able to buy that stock back at a lower price and return it to the owner at a profit. Basically, the two strategies are the same, though there are some stark differences between them. The following table summarizes both the similarities and differences:
| Buying a Put | Selling Stock Short |
| Bearish, i.e., it pays off when the stock goes down | Bearish, that is, it also pays off when the stock goes down |
| Limited loss. Maximum loss is the premium paid | Unlimited loss. Maximum loss has no limit |
| Requires less of a capital commitment (initial investment) | Requires more capital commitment, plus margin interest |
| No uptick rule | Uptick rule: a condition |
| Loses time value quickly (fast time decay) |
Stock price can move down slowly, but the position will still be profitable |
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