In this strategy, the investor has bought the right to sell the underlying asset in the future at a predetermined strike price (K). If the settlement price (underlying stock closing price) at maturity is lower than the strike price, then the put option holder will exercise his option and sell the stock at the strike price (K). If the settlement price (underlying stock closing price) is higher than the strike price, the option buyer will not exercise the option as he can sell the same stock in the market at a price higher than the strike price.
