Put Option

An option contract that gives the holder the right to sell a certain quantity of an underlying security to the writer of the option, at a specified price (strike price) up to a specified date (expiration date).

A put becomes more valuable as the price of the underlying stock depreciates relative to the strike price.

Example: You have one Apr 09 Company 20 put, you have the right to sell 100 shares of Taser at $20 until April 2009. If shares of Taser fall to $10 and you exercise the option, you can purchase 100 shares of Company for $10 in the market and sell the shares to the option’s writer for $20 each, which means you make $1000 (100 x ($20-$10)) on the put option.