Put Option

An option that gives the owner of the contract the authority to sell, to the writer of the contract, a predetermined amount of a security for a fixed period of time and for a predetermined price. This is similar to short selling because the investor hopes that the security will fall in price. Why, you ask? If the price of the security falls and the investor has agreed to sell the security for more than it is trading at, then he can buy the security for a cheap price and sell it for the predetermined price.