Final answer:
A put option grants the right to sell shares at a set price before the expiration date, commonly sought when expecting a stock's decline. This contrasts with a call option and is part of the investment mechanisms in public company stocks, which can yield dividends or capital gains.
Step-by-step explanation:
The right to sell 100 shares of a specified stock at a specified price by a specified expiration date is known as a put option. When someone buys a put option, they are purchasing the right to sell a stock at a particular price within a certain timeframe, with the anticipation that the stock's price will decrease. This is different from a call option, where the buyer acquires the right to buy the underlying stock at a predetermined price by the expiration date.
A public company issues stocks that can be bought and sold by financial investors. Shareholders, who own parts of the public company, may receive dividends or benefit from capital gains when they sell their shares at a higher price than the purchase price.