What is a 'put' option?

A 'put' option is indeed the right choice, as it represents the right for the holder to sell an underlying asset at a specified price, known as the strike price, within a predetermined period. This financial contract provides investors with the opportunity to hedge against potential declines in the value of the underlying asset. If market conditions worsen, the holder can exercise the option to sell the asset at the agreed-upon price, potentially mitigating losses.

The core functionality of a put option is that it offers a way to manage risk associated with the ownership of an asset. If the asset's value declines below the strike price, the investor can sell it at the higher strike price instead of suffering from the lower market price. This characteristic makes put options a popular tool for investors looking to protect their investments.

In contrast to the other options presented, the 'put' option is specifically focused on selling, distinguishing it from calls, which relate to buying opportunities. Understanding this fundamental aspect of put options is crucial for successfully navigating the debt and money markets.