What is “Put Option”?
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The option that gives the buyer the right to sell is called a put option.
A put option grants the holder the right, but not the obligation, to sell the underlying good to the option writer.
Suppose you bought a put option of 2,000 shares of RIL at a strike price of Rs250 per share. This option gives its buyer the right to sell 2,000 shares of RIL at Rs250 per share on or before specified date say March 28, 2006. The seller of this put option who has given you the right to sell to him is under obligation to buy 2,000 shares of RIL at Rs250 per share on or before March 28, 2006 whenever asked.
