A put option is a financial contract that gives the holder the right, but not the obligation, to sell a specified asset (such as stocks, commodities, or currencies) at a predetermined price (known as the strike price) within a specified period of time. Put options are commonly used as a hedging tool or for speculative purposes in the financial markets.

When an investor purchases a put option, they are expecting the price of the underlying asset to decrease. If the price does indeed decline below the strike price before the option's expiration, the investor can exercise the put option and sell the asset at the higher strike price, thereby profiting from the difference between the market price and the strike price.

However, if the price of the underlying asset remains above the strike price or does not decline sufficiently, the investor may choose not to exercise the put option. In this case, the investor's loss is limited to the premium paid for purchasing the option.

Put options provide investors with a mechanism to protect their portfolios against potential downward price movements, limit their losses, or speculate on declining market trends. They are commonly traded on options exchanges and play a crucial role in risk management strategies for investors and traders.

A put option is a financial contract that gives the holder the right, but not the obligation, to sell a specific quantity of an asset, like stocks, at a predetermined price (strike price) within a set time frame. If the asset’s market price falls below the strike price, the holder can sell it at the higher strike price, profiting from the difference. This makes put options popular for hedging against declines in asset value, as they effectively lock in a sale price.

The buyer of a put option profits when the underlying asset’s price decreases, while the seller (or writer) of the option is exposed to the risk if prices drop. Put options are widely used in strategies for managing risk and speculating on asset price movements.