Identification

• Put options give the seller of an asset the right, but not the obligation, to sell an asset. The put option contract outlines a specific asset price and a fixed expiration date of the contract.
  
  

Significance

• A seller uses a put option if it is believed the asset price will decrease. The seller profits when the asset decreases in value.
  
  

Hedging

• Put options can be used to hedge a portfolio, as well. A protective put is used to lock in profits. For instance, an investor will buy "at the money" put options, which will appreciate if the stock falls in price. Visit Resources to read about at the money put options.