Glossary

Put option

Put options are financial contracts that give the owner the right, but not the obligation, to sell an underlying asset at a specified price within a specific time. A buyer of a put can profit when the underlying asset falls in price.

Put options explained

When you buy a put option, you take a short position on the price of the underlying asset.  If the price falls below the strike price within the contract’s expiry date, you could exercise your option, and sell the underlying for a price above its new market value.

But if the price rises, there is no obligation to sell. This means you would not lose money by selling below market price, although you would lose the premium you paid for the option.

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