DeCalls Whitepaper

Buying a Put Option (Long Put)

Why a trader might choose to buy a Put option
Previously, there was no way to profit from falling floor prices – but now, you can!
If you think the floor price of an NFT will suddenly fall, the best strategy would be to buy a Put option. This would give you the “right” to sell the NFT at the strike price if the floor price falls below it.
Note: you do not have to be holding the NFT in order to buy a Put option.
Consider this scenario: the floor price for a certain project is 25 SOL. You pay 1 SOL to buy a Put option with a strike price of 20 SOL. Later that week, the devs rug the project and the price falls to 10 SOL. The Put option you bought still gives you the right to sell the NFT at 20 SOL, meaning you can pick up a common off the floor for 10 SOL and exercise the option in order to sell it for 20 SOL (pocketing 10 SOL profit).
Alternatively, since the Put option you bought has 10 SOL of “intrinsic value” (i.e., the difference between the strike price and the current floor price), you may sell the option itself for 10 SOL and perhaps a little bit more if there is still a good amount of time left till expiry.
Another strategy for buying a Put option would be as insurance on NFTs you do own. To reuse the example above, let’s say you own 10 NFTs from this collection but you’re nervous about some potential bad news that could ruin the project. You worry about being able to find the liquidity to quickly sell your 10 NFTs if the floor price suddenly drops, so you buy 10 Put options instead.
If all goes well with the project and the floor price rises, your Put options would expire worthless and you would lose the amount of SOL that you paid for them (however, your 10 NFTs would have gone up in value so you’re okay with it). If the bad news came and your project collapsed to 0 in a single day, those Put options locked in a sale price for you to sufficiently liquidate and you protected yourself from significant loss.