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Put option 1.
An option that gives one party (the option holder) the right, but not the obligation, to sell to another party (the option writer), an agreed amount (over-the-counter option) or a standardized amount (exchange-traded option) of an underlying at a specified price (the exercise price) at a specified future date or dates, or for a specified period, in exchange for a premium paid to the writer, which represents the initial price of the option.
A put option holder can close its position by selling a put option with the same characteristics, exercise its right, or abandon its option at maturity. The put option writer is obliged to purchase the underlying if the holder exercises its right; the writer is bound by the decision of the holder.
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Synonyms and variations
- Put 1.