What is a Put Option?

Answer:
A put option gives an investor the right to

sell a certain amount of securities at a specified price during a certain time period. A put option is the opposite of a call option. If an investor owns a call option, he or she has the right to purchase, rather than sell, a certain amount of shares at a specified time period at a specific price.

Basically, if you own a put option, you’ll have the right to sell a certain amount of stocks at a specific price regardless of how the price of those stocks change. For example, say you own 100 shares of a computer company’s stock with a put option that allowed you to sell up to 200 shares of stock by September of 2007 for $20 a share. If the cost of the shares is only $15, you can actually purchase the shares from someone in the market for $15 each, and resell them for $20 each until your put option expires, thereby making a profit. Put options generally expire the third Friday of the month of their expiration date.