A put option that has a commodity index as underlying rate or price. The performance and final payout of the put option contract is tied to a certain commodity index, which is typically calculated on the basis of the prices of respective, individual commodity futures. The holder (buyer of the put) has the right to pay the difference between the execution price (strike price or exercise price) of the option and the final settlement price of the options series (cash settlement)- of course, when the latter is lower than the former and the premium combined.

The writer of a put is obliged, if the option is exercised, to settle in cash the difference between the strike price of the option and the final settlement price of the options series. The final settlement price is determined on the strike day of the contract.