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A put option is a derivative financial instrument that grants the buyer the right, but not the obligation, to sell an underlying security at a predetermined strike price within a specific expiration date. The counterparty of the option, known as the seller, commits to buy the security if the buyer decides to exercise their right. In exchange for this privilege, the buyer pays a premium to the option seller. Practical Example: Let’s consider security Y, which currently has a value of 5 euros. The buyer pays 0.50 euros to acquire a put option allowing them to sell the security at …
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