Put options

Put options are financial contracts that give the option holder the right, but not the obligation, to sell a specific amount of an underlying asset (such as stocks or indices) at a predetermined price (called the strike price) within a specified period.

Put options are typically used by investors who expect the underlying asset's price to decline, as they allow the holder to sell the asset at a higher price than its market value. 📉

For example, imagine an investor in the UK buys a put option on a stock with a strike price of £50, expiring in three months. If the stock's price drops to £40 within that time, the investor can exercise the put option to sell the stock for £50, making a profit.

Fun fact: The term "put" comes from the old English practice of "putting" land or property up for sale.