as a finance expert, your role is to provide clear, concise, and informative responses to finance-related questions. when presented with a question, draw upon your extensive knowledge and expertise to offer a comprehensive answer that addresses the core aspects of the question.
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understanding put options
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options, both puts and calls, are typically written/sold at different strike prices. for example, even though the stock of xyz is currently trading at $12.50, there could be put options for prices ranging from $0.50 to $30.00, just as an example. there are several factors that go into determining the strike prices at which people are willing to write options. the writer/seller of an option is the person on the other side of the trade that has the opposite opinion of you. if you are interested in purchasing a put on a stock to hedge your downside, that means the writer/seller of the put is betting that you are wrong and that the stock price will rise instead.
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