A Put option gives the holder (buyer/ one who is long put), the right to sell a specified quantity of the underlying asset at the strike price on or the expiry date. The seller of the put option (one who is short put) however, has the obligation to buy the underlying asset at the strike price if the buyer decides to exercise his option to sell. Example: An investor buys one European Put option on Stock ‘B’ at the strike price of $3.00, at a premium of $0. 25. If the market price of Stock ‘B’, on the day of expiry is less than $ 3.00, the option can be exercised as it is ‘in the money’. The investor’s Break-even point is $2.75 (Strike Price – premium paid) i.e., the investor will earn profits if the market falls below $2.75. Suppose stock price is $2.60, the buyer of the Put option immediately buys Stock ‘B’ from the market @ $2.60 & exercises his option selling the Stock ‘B’ at $3.00 to the option writer thus making a net profit of $0.15 {(Strike price – Spot Price) – Premium paid}. In another scenario, if at the time of expiry, market price of Stock ‘B’ is $3.20; the buyer of the Put option will choose not to exercise his option to sell as he can sell in the market at a higher rate. In this case the investor loses the premium paid (i.e. $0.25), which shall be the profit earned by the seller of the Put option.