Who sells and buys put options?

Answer 1

A put has limited upside and acts as insurance on the underlying. The most you can make by buying (being long the put) is the strike price less the premium. You may have bought for any number of reasons: to speculate on a downward movement, to insure a long position, or to hedge an option written at a higher strike (vertical spread), or to hedge an option written at a different date (calendar spread).

On the sell side, you may be using your cash to generate income. You may be desiring to go long the underlying but only under a price you deem fair. You may be closing out a hedge before it expires worthless, or putting on any number of trades that involve multiple options and different risk/reward charts.

I'm sure I haven't covered all the possibilities here; but this should give you some ideas. BTW, the answers for call options will be similar due to put-call parity. However, calls have theoretically unlimited upside if the underlying increases in price.