Options & derivatives
Put option
A put is an option giving the right to sell an asset at a set price (the strike) before expiration. You buy it betting on a decline.
A put is an option giving the right to sell an asset at a set price (the strike) before expiration. You buy it betting on a decline.
If the price falls below the strike, the put gains value. It also works as insurance: a shareholder buys puts to protect against a drop. The buyer's loss is capped at the premium.
You buy a $50-strike put. The stock falls to $40: your right to sell at $50 becomes valuable.
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