What Is a ‘Put Option’ and How Does It Differ from a Call Option?
A put option is a financial derivative contract that grants the holder the right, but not the obligation, to sell an underlying asset at a specified strike price on or before a certain date. It differs from a call option, which grants the right to buy.
Put options are used to speculate on a decrease in the asset's price or to hedge against a decline in the value of an owned asset. The buyer profits if the market price falls below the strike price minus the premium.
Glossar
Financial Derivative Contract
Contract ⎊ A financial derivative contract, within the cryptocurrency ecosystem, represents an agreement to exchange assets or cash flows based on the future value of an underlying crypto asset or index.
Strike Price
Reference ⎊ The Strike Price is the predetermined reference level set at the contract's inception against which the underlying crypto asset's spot price is compared at expiration or exercise.
Put Options
Premium ⎊ Put options, within cryptocurrency markets, represent a contractual obligation assumed by a seller to fulfill a buyer’s right to sell an underlying asset at a predetermined price on or before a specified date, functioning as a protective mechanism against downward price volatility.
Underlying Asset
Foundation ⎊ The concept of an Underlying Asset, within cryptocurrency derivatives and financial markets, establishes the core reference point for valuation and risk transfer.
Market Price
Valuation ⎊ Market price represents the most recent, observable valuation at which an asset, such as a cryptocurrency or a derivative contract, was traded on an open exchange.