Define the Difference between a Short Position and Buying a Put Option

A short position involves borrowing an asset, selling it immediately, and then buying it back later to return to the lender, hoping the price has dropped. The potential loss is theoretically unlimited if the price rises.

Buying a put option gives the holder the right, but not the obligation, to sell an asset at a specific price (the strike price) before a certain date. The maximum loss for a put buyer is limited to the premium paid for the option, making it a defined-risk strategy.