A put option is a contract that gives the holder the right, but not the obligation, to sell an underlying asset at a specified strike price within a certain time period. Put options increase in value when the underlying asset price decreases, providing downside protection or bearish speculation opportunities. Put buyers pay premiums for this right.

Put options serve multiple purposes including portfolio hedging, speculative positioning, and income generation through put selling strategies. Put value depends on underlying price, strike price, time to expiration, volatility, and interest rates. Understanding put option mechanics helps implement protective and speculative strategies effectively.

Real-world example: An investor holding 1,000 shares of Apple at $160 buys put options with $150 strike price for $3 premium, creating downside protection that limits losses to $13 per share (strike price minus premium) regardless of how far Apple stock might decline.