Which statement defines a put option?

• A. An obligation to buy a security at a fixed price.
• B. An option to sell a specified amount of an underlying at a specified price within a time frame.
• C. A contract to receive dividends.
• D. A forward contract that expires at maturity.

Answer: (B)

A put option is a contract that gives the buyer the right, but not the obligation, to sell a specified amount of an underlying asset at a fixed price (the strike) within a certain time frame. The statement describes precisely that right to sell at a specified price during a defined period, which is the defining feature of a put option.

The other descriptions refer to instruments without that optionality: an obligation to buy describes a forward/futures contract (you’re committed to buy at the contract price), a contract to receive dividends isn't an option at all, and a forward contract that expires at maturity is also an obligation with no optionality. Put options enable gains when the underlying falls in price, since you can sell at the higher strike price.