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A put option gives rights to sell the underlying stocks (not obligation) to sell the stock at fix price. It is a type of insurance which protects you from loss. Suppose a trader bought shares of company xyz at Rs 100, now the share price is falling down. Obviously, the trader is worried about loss incurred.
But if he/ she buys a put option for strike price Rs 105 at Rs 10, so that he/she has a right to sell the stock at Rs 105. By this way they can stop the loss position.
Read more about Option trading strategies
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