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A put option, which is a type of contract used in finance, offers the owner the right—but not the obligation—to sell the underlying asset at the strike price within the given time frame. Put options can also be used for speculative purposes. Put options are frequently utilized as a hedge against the potential for a price decrease in the underlying asset.
The seller of a put option receives a premium from the buyer, and if the option is exercised, the seller assumes the responsibility of purchasing the underlying asset at the strike price. The buyer can sell the asset at the higher strike price and benefit from the difference if the price of the underlying asset drops below the strike price. If the asset's price rises over the strike price, the buyer may decide not to exercise the option, letting it expire worthless and forfeiting the option premium.
Investors and traders frequently use put options to protect their portfolio values from losses or to profit from a decline in the value of an asset. They are typically combined with call options to create intricate options strategies that enable investors to control risk and possibly make money in a range of market circumstances.
