What does a put option enable an investor to do?

A put option is a financial contract that grants the investor the right, but not the obligation, to sell a specified quantity of an underlying asset, typically shares of stock, at a predetermined price within a specific time frame. This means that if the market price of the stock declines, the investor can "put" (sell) the stock at the higher strike price of the put option, thereby minimizing potential losses or taking advantage of a favorable market condition.

The key aspect of a put option is its utility as a form of insurance against a declining stock price. By owning a put option, investors can protect themselves from losses in their stock portfolio or can speculate on the decline of a stock, profiting if the stock price falls below the strike price of the option.

The other options do not accurately reflect the function of a put option. Buying shares at a future date corresponds to a call option, purchasing options at a reduced price does not represent the primary function of a put option, and holding onto shares to wait for appreciation does not involve the rights associated with put options. Thus, the framing of the correct choice clearly illustrates the primary utility of a put option in corporate finance.