How Does a Put Option Provide a Similar Hedging Function to a Short Futures Contract?

A short futures contract locks in a selling price for the underlying asset, hedging against a price drop but forfeiting potential gains. A long put option, conversely, gives the holder the right to sell the underlying asset at a fixed strike price.

This sets a floor price, hedging against a drop, but the holder retains the upside if the price rises, minus the premium paid. The put option provides downside protection with unlimited upside, unlike the futures contract.