An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a price within a specified time.
The buyer of a put option estimates that the underlying asset will drop below the expiration date.
Then an individual purchases a put, they expect the underlying asset will decline in price. They would then profit by either selling the put options at a profit, or by exercising the option. If an individual writes a put contract, they are estimating the stock will not decline below the exercise price, and will not increase significantly beyond the exercise price.
The buyer of a put option estimates that the underlying asset will drop below the expiration date.
Then an individual purchases a put, they expect the underlying asset will decline in price. They would then profit by either selling the put options at a profit, or by exercising the option. If an individual writes a put contract, they are estimating the stock will not decline below the exercise price, and will not increase significantly beyond the exercise price.
Source: http://www.investopedia.com/terms/p/put.asp
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