put option

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A contract giving the right but not the obligation to sell a good, security, or currency on some future date at a price fixed when the contract is first taken out. A put option will be exercised when the date arrives only if the spot market price is below the option price; if the market price is higher than the option price it will pay better to sell on the spot market. A put option can be used to reduce risk by somebody who has to hold the good, or as a speculation by somebody who expects a low spot market price.

Subjects: Economics.

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