put option

A put option is a financial contract that gives the buyer the right, but not the obligation, to sell a specific asset (like stocks) at a predetermined price within a certain period. It acts as insurance; if the asset’s value drops below that price, the buyer can sell at the higher strike price, potentially reducing losses. Investors buy put options to hedge against potential declines or to profit from falling prices, while sellers (writers) earn a premium but take on the obligation to buy the asset if the buyer chooses to exercise the option.