An equity option that gives its holder the right to sell the underlying stock/ equity at a stated exercise price during, or at the end of, specific period of time.

For example, the buyer of an equity put, who has purchased the right to sell 100 shares of the underlying stock at an exercise price of USD 45 any time up until March, would choose to exercise the option if the market price of the stock, before or in March, is lower than the exercise price, taking into account, of course, the premium paid to the option’s seller. That is to say, if the market price of the stock is lower enough to compensate for the premium, say USD 35 market price along with a premium of USD 5, the buyer would make a net profit of (45- 35- 5), or USD 5 per stock. For the entire contract, the net profit is USD 5 x 100 = USD 500.