Short Put Option Strategy (Best Guide w/ Examples)

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Selling put options (short puts) is a very bullish strategy that consists of selling a put option on a stock that a trader believes will rise in price.
In this video, you'll learn:
1. What are the characteristics of the short put strategy?
2. What does the expiration risk graph look like when selling put options?
3. What are the option Greek exposures when selling puts?
In addition, you'll see three real short put trade examples to demonstrate how put option prices change through time as the stock price shifts.
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[@projectfinance]

✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf

[@astrosntexans]

I would add that its best to only sell puts on stocks you wouldn't mind owning at a discount to today's price anyways. its actually a smart way to get into a stock you want at a lower price. And get paid to wait.

[@KyJack13]

I use this strategy for just that reason.

[@josephcoffman2441]

That is exactly the reason I use it all the time.

[@fongheenkitaloka2800]

When I hold my short put through through expiration, do I own it at the strike price that I've set beforehand or do I own it at the current market price?

[@MaxxerG]

Just realized that

[@DanL604]

If it goes up, are you SOL? Do you usually do a long put? (Sorry I’m a complete newbie)

[@ko667]

Truly love the way you explain each steps within the options strategies... much thx

[@seba_arg]

Congratulations on the quality, clarity and depth on this topic.

[@fixxer31]

Best explanation I've found. Thank you

[@VIJAYKUMAR-ju9ec]

U have a great way to teach tough put sell technique in a absolute simple way......!!

[@damboren6142]

thank you buddy!! it's really details and informative session, love it!!!

[@stevenkelly8567]

This video is incredible. Love the examples and the way you teach it ! Thanks.

[@gnbg69]

Very well explained, didactic and concise!

[@airsofterzzz3580]

Thank you so much for making this video. Love that people are sharing this kind of stuff. Keep it up. Subbed

[@projectfinance]

You're welcome and stay tuned for more!

[@fabianrichburgh6517]

My favorite option trading channel! Thank you

[@projectfinance]

Wow, thanks! I'm glad you enjoyed the video.

[@tat6ming]

Thank you for the video and it is very easy to understand the short put concept with the use of illustration.

[@projectfinance]

You are welcome!

[@h7opolo]

super fantastic video. i learned so much because it was clear and thorough with a lot of illustrations and examples.

[@projectfinance]

Thank you for the comment! I'm glad you liked the video. Stay tuned for more! -Chris

[@h7opolo]

@@projectfinance cool

[@ProyectoInnovador-hy6dw]

Just wonderful, I have been researching "when should you sell options in the money?" for a while now, and I think this has helped. Have you ever come across - Fiyarper Conspicuous Future - (Have a quick look on google cant remember the place now ) ? It is a good exclusive guide for learning binary options trading signals minus the headache. Ive heard some great things about it and my co-worker got amazing results with it.

[@allegoricalstatue]

​ @projectoption do you have a video like this one and the short call options video, but from the perspective of a trader buying the options instead of the one selling them? Hah, if not would you consider making one?

[@johnwallace3988]

Good information about maximum potential profits and losses of selling puts.

[@FranciscoGonzalez-fs1ud]

Great explanation,thank you!

[@projectfinance]

You're welcome

[@geetapandey5325]

Good info- thank you

[@ee_li]

Thanks

[@jrome9813]

Great video.

[@haila9354]

awesome explanation. thanks.

[@projectfinance]

Thank you!

[@rajpalbhullar9165]

absolutely great explanation

[@projectfinance]

Glad you think so! I'll have to update this video to fit my newer presentation format.

[@guyredares]

Great explanation

[@projectfinance]

Thank you!

[@chimbatete]

Hi. Do you buy the option back before expiration when you feel like you are getting the most profit (2 days before expiration where it dipped around $5) or you just let it expire?

[@mingwu10able]

When do put option buyers exercise the options before expiration? I assume American options. Doesn't seem to happen often, why? Thanks

[@loversrlair]

Is there any risk of assignment if stock fall below the put strike 2 days before expiration?

[@bidxask4666]

So on the second one if we bought the premium back to close at a lower price than our credit we’d take small profit in towards the end but once it expired would lose money having to buy it at more than the current stock price? Because it wasn’t above our stike didn’t that essentially lose?

[@gangcai2876]

Why do we need buy another put? You can create a limit order to buy back your option, it is too high. Anything I am missing?

[@bronsonlee7372]

I just found ur channel and watch all ur spread videos i ama newbie who just vot interests on trading but for ur all technique i have to use margin acct dont I. Or are there any ways to avoid Pdt rule and still learn and pursue these spreads technique esp i interested in BULL put creat spreads. So for all those fance techniques like iron condors and butterflies etc. I have to do only with margin accts that i am hesitant to tie up 25000 as a newbie ur brief explanations would be appreciated i have not talked to any brokers yet. U seem to like tastyworks. I do smash the like buttons hard for all ur spreads videos. I envy ur intelligence on this options trading this old man cannot be like that at all but i am trying to learn to train my brain. Mahalo from Hawaii

[@phantomcreamer]

I have a sell put option that expires in the money today on robinhood. What time can I expect Robinhoos to exercise it and buy the shares? Is there any way I can do it sooner so I can sell covered calls on it?

[@Slick5923]

Thank you for the GREAT video lesson! Can you please explain further what you meant in the summary statement towards the end? .... "Selling a put option has more loss potential than profit potential, but that translates to a high probability of profit." ....... It sounds contradictive to me..... How can a strategy have more loss potential, but at the same time have a higher probability of profit?

[@projectfinance]

Thanks for commenting! If you imagine a fair betting scenario where your payouts are related to the probability of being correct, then we'd expect the same payout/loss potential if we have a 50% probability of being right. $10 profit if you are right, $10 loss if you are wrong. If you have a higher payout potential than the loss potential (perhaps $5 of loss potential and $10 of profit potential), the risk/reward would only be fair if you have a lower than 50% probability of success. If you had a 50% chance of being right (making money) but your payout was greater than your loss potential, then you'd expect to make money over time from playing the game since half the time you will win and half the time you will lose, but when you win you make more than when you lose. In options trading, the probability of an options strategy making money can be understood by looking at its risk/reward potential. When you have more loss potential than profit potential, the strategy has a greater than 50% probability of making money, and vice versa. When selling puts, you make money when the stock price stays the same, increases, or at least stays above the put's strike as time passes. There are many scenarios where you make money, which makes it a high probability strategy. But the loss potential when the stock falls immensely is high, which makes this a high risk / low reward strategy.

[@astrosntexans]

@@projectfinance I will add that the loss at least comes with ownership of 100 shares so its not a pure example of a loss...if you hold on to those shares you may make you loss back in the form of the stock going back up plus dividends along the way.

[@legopadawanlearner8390]

Is a buy stop limit order the best way to protect against a huge loss on your short put?

[@DAVENATCHSTOCKS]

New subi in the BUILDING! Your value is intrinsic!! Keep it flowing...bless!

[@retailar2259]

This is glorious, I have been researching "trading options system" for a while now, and I think this has helped. You ever tried - Winoorfa Option Olegroson - (search on google ) ? Ive heard some awesome things about it and my m8 got excellent results with it.

[@Slick5923]

Is this scenario correct? Say a Put currently has a Bid of .20 and Ask of .30 in the open market and I want to Short the Put so I would "Sell to Open"...... Can I use a Limit order and select "Sell To Open" at .50? ...And when I do that, my bid would post as an "Ask Bid" at the .50 to the open market. And if someone bids the .50 to "Buy to Open" the Put, I have a good chance of selling it to them at that price. Then, can I immediately put in a limit order to "Buy To Close" the Put at .10 and it would show up as a "Buy Bid" at the .10 to the open market. And if someone bids the .10 to "Sell To Close" the Put, I have a good chance of buying the Put back (and closing it out of the market) at the .10....... Therefore, I would make $50 up front, then loose $10 to close, with net profit of $40 (less fees).

[@jayfaulkner1274]

Very good video about selling a put.

[@projectfinance]

Glad it was helpful!

[@user-fi1kn3oq4m]

why cant we hold the short sell value in the same way we hold on to covered calls? can we?

[@Elcamina145]

Thank you for the video and especially examples. My only question is in the example #2, the buyer could’ve exercised the option since the stock fell below a strike and below break even for the seller. Am I understanding this right? The seller got lucky?

[@mauricesjq]

Not really, the reason why the buyer might or might not exercised the options is due to the one main reason. They are bullish on the business on the longer term, but bearish on the shorter term. So unless the price drop drastically, e.g 30-40% drop in current price, most buyers will not exercised the puts option!

[@uknoimright]

In the second real life example he gives, the short put position realizes a less-than-maximum profit because the stock price at expiration is above the breakeven price but below the strike price. However, he mentioned that the short would also have to buy the 100 shares of stock at roughly $660. Is this expenditure of $66,000 not included in the profit/loss analysis, since he could just sell the stock immediately after being forced to buy it, assuming the long position exercised the put?

[@PathfinderHistoryTravel]

The best options education videos on KZbin

[@projectfinance]

Thank you for this comment! I really appreciate it! -Chris

[@rl07c86]

Can you sell put above the current stock price???

[@JahonCross]

When selling a put should I sell at the bid mid or ask?

[@iwian64]

so when we check implied volatility for a sell put that has to be as low as possible? Thank you

[@bluesky5587]

I do not know about that ..from what I know from learning ..u need high Iv to get a better bigger premium,..so I for one would sell a put on a high iv day when stock or etf is down big ..get great premium and probably will show immediate profit next day if stock rebounds.... I stand to be corrected but this is what I read elsewhere.

[@yelpeellc]

Perfect explanation, what if nobody buys the contract we SELL, as stock stay up until expiration and ofcourse premium price go ZERO*?

[@projectfinance]

If you are trading active stocks/products such as AAPL/SPY/TSLA/etc. with active option markets, you won't have a problem getting filled on your trades (finding a counterparty). You can't sell the put in the first place if there isn't a buyer. If you sell a put, somebody bought the put from you. As every minute passes, the put's value will change, and you can always close the trade at any time by buying back the put you shorted. Don't worry about who your counterparty is or why they are taking the other side of the trade. You don't know why they are buying the put. They could be buying put against shares of stock, in which case they are hedging against stock price decreases and probably don't mind losing 100% of the premium if the stock continues to rise. I hope this helps! -Chris

[@yelpeellc]

projectoption Chris thanks for your reply

[@maxican28]

So when the trade does not go in your favor can you exit or is it easy to get out near break even point? Thank you.

[@rRobertSmith]

Unless your sitting there watching the screen with a good stop loss in from the beginning this strategy can be very dangerous to your financial health, also AS ALAWAYS start with very small numbers and dollar amounts to practice.

[@adamyounis93]

I can't tell whether I want to sell puts to buy discounted shares or to do covered calls.

[@anigreen6939]

couldn't have been more clearer explanation of sell put. thank you

[@fuckyeahXD16]

Question if I buy a put in the money and sell it before expiration with sale price of 1.00 that would equal $100 would I see that Profit once it expires or at the moment of sale?

[@projectfinance]

Your profit/loss adjusts every minute of the day. You will realize the profit/loss immediately when closing your position. If you sell an option for $100 in premium, you don't have any profits unless the option price falls below $100. There is no immediate profit, you simply collect an amount of money with the goal of paying out less money later to close the position (example: sell for $100 in premium and buy back the option for $50 in premium. $50 profit secured).

[@voltairegansit6736]

If I place a sell to open put option at $34 strike, weekly for $.50 premium and stock currently at $35/share. If I want to close the position, would i place a "buy to close call option"? if so, is there a premium to me for placing a "buy to close call option" or a cost?

[@thetruthandnobs2]

Do you run any put Selling subscription service? Auto tradeable?

[@projectfinance]

I do not, I'm sorry.

[@belesswrong422]

So, if you sold a put for $100 with a $3.50 put sale price does that mean you must have $9,650 in your account to sell that put? Is this trading days or calendar days? Also, Can the person buying that put exercise that option at any time? For example if you sell a 30 day put option for $100 and in 15 days the price drops to $75, but by day 30 the price rebounds to $110, could you be forced to buy that stock at day 15 or is it that the only day that matters is day 30?

[@iwian64]

Hi, but with Selling Puts, wouldn't you put a strike price lower than the current stock price?

[@RagnarokCo]

Most commonly yes but if you are confident the stock will rise you will get the most money from the highest strike price.

[@celyl]

Sell put otm can be neutral strategy.

[@GloriaLau]

Do you keep the entire premium you collected if you close out of a position before expiry while it is still profitable? And thanks I loved the examples, great video!

[@chewie1355]

It’s prorated. So not the full amount.

[@GloriaLau]

@@chewie1355 Thank you!

[@TheEMenk30]

So as soon as the stock hits my strike price, I can close the position and keep my max profit (premium)?

[@projectfinance]

You can close an option any time you want. It doesn't have to hit the strike price.

[@mahdighadrdoost7811]

so if I sell put option and at the expiration date, the stock price is lower than my stroke price I have to buy 100 shares and keep it ??

[@feedweeb8856]

yes and you buy them at the strike price, not the current (lower) price.

[@mikekelvinesguerra9418]

Why is high IV not good for selling puts? Isn’t it that if price goes up it is also good for a sell puts position?

[@mikerobideau6712]

Check out the Expiration P/L Graph. Your profits are flat as the stock goes higher because you're collecting premium but not long in the stock itself. Therefore, the stock going up by a lot won't help you any more than the stock going up by a little. Volatility will hurt you in the negative direction, so overall volatility is only hurting your put sale profits.

[@josephsaeteurn9158]

7:30 i thought when im shorting a stock i want the price to stay below my strike price correct? we make money when it is going down.. now im confused with your example.

[@loversrlair]

Shorting a stock require capital. This example works great when you don't want to expose your capital. You sell short put at your desired price and hope it won't fall below break even. Time decay will work for you. And you will collect premium

[@thejourneymaninvestor6087]

Since you are setting up these trades at-the-money (50 delta) it should be mentioned that these trades are all 50/50 coin flips. You are just as likely to win as you are to lose (all things equal). I personally would never take any 50/50 trade, especially not a short put. The reason I use options is to give myself an 80%-90% probability of profit. If I wanted to take a 50/50 bet then I'd just buy the stock but I get that some people want to feel like they are "getting paid" to buy the stock. To each his/her own.

[@rickychan8108]

Closing your put position (youre the put seller) before expiration, how do you lock in profits when you already received the credit from selling the premium? Isn't the premium max profit?

[@user-jo2bb9ws1p]

That's my qastion

[@01Sterlitz]

Buy the put back: 1)sell put and get money. 2) on expiration day, buy put back, with portion of earning from sale, for less than you sold it. This closes position and ensures you don’t get stuck buying stock.

[@TheF22rapter]

When you get assigned the shares, does that mean you receive the shares that the put buyer didn't exercise?

[@projectfinance]

When you get assigned on a short put, that means somebody exercised that put and decided to sell/short 100 shares at the put's strike price. Since you were assigned, that means you will buy 100 shares at the put's strike price automatically.

[@andrewlillys3486]

projectoption how often in your experience are options exercised

[@Slick5923]

In Example #2.... Is this correct?....The put was sold by the person shorting the put (Sell To Open) at 24.52 and that person immediately collected the $2,452 into their account... then, right before expiration, the put was in the money, but still worth about 10.00.... So at that time that person has two choices, either buy back the put (Buy to close) at 10.00, which would cost them $1,000 so they would net the difference of $2,452-$1,000=$1,452.... The other choice is to do nothing and let it expire "In the money" and at that point that person would be required to purchase 100 shares at the 675 strike, then could immediately sell the shares at today's price of about $665... which would equate to $67,500-66,500=1,000 loss + original $2,452 = $1,452 profit.

[@projectfinance]

You are exactly right. Great job on understanding the concepts!

[@soultradespt]

Hi. Question. The strike price for a Short Put must be below the market price. Why in all examples Put Strike are above market price ? Thanks !

[@projectfinance]

If you short a put them you will be selling a put with a strike below the stock price. Let me refer back to this video to see what you mean.

[@projectfinance]

Ahh yes. In the examples I used an “at the money” strike price but in those examples the strike was slightly above the stock. You can sell slightly ITM outs for more bullish exposure but normally people sell far OTM strikes

[@private464]

QUESTION: first of all thank you so much for sharing this knowledge with me. Do you think it would be wiser to just own TSLA shares OR to sell TSLA put options? I own a lot of TSLA and think long-term the stock will go way up. But I could be making monthly income selling puts and effectively lowering my share price, instead of absorbing the whole loss when it drops. Owning 200 shares of TSLA OR selling 2 TSLA put options contracts...which do you think is better?

[@samallen4213]

What's the best strategy for limiting losses for a put sale that's going against you?

[@feedweeb8856]

buying your own put back it seems. No cue how to do it though.

[@franklinboet4472]

What happens to the Seller's short Put if the Buyer would have closed his position when the stock dropped to $141?

[@projectfinance]

Franklin, Great question and the answer is that nothing happens when the stock price hits an option's strike price. However, if the buyer of the put option exercised the option, somebody with a short position on that option would be assigned 100 shares of stock. The process of selecting a person to assign is random and is discussed in our exercise/assignment video. Most options do not get exercised by the buyer since the buyer will lose the extrinsic value of the option when they exercise. If the stock price is right at the strike price, the option's value will consist almost entirely of extrinsic value, which means a trader would definitely not exercise the option. Exercised options are typically very deep in-the-money with little extrinsic value. With that said, I wouldn't worry about assignment on a short option unless the option is in-the-money and has very little extrinsic value (less than $0.25), which occurs when the option is deep-in-the-money or the option is in-the-money and expiring soon. -Chris

[@sekim1320]

projectoption l

[@animalfriends148]

Good info. Too fast for me to keep up thou. Tammy

[@projectfinance]

Thank you! I'll do my best to slow down in future videos.

[@cbro777]

But the graphics and explanations are excellent and you can always re-watch to get the concept stuck in your brain. Great presentation

[@Zenbeau]

watch it over and over again

[@bhairavigadhvi9]

Umm if i short a put option can i hold it overnight and can i buy it on the day of expiry???And is it true that on the day of expiry its prices gets 0???so if i shorted whn its price was 10rs..thn on the day of expiry it becomes 0 so i get profit of 10rs??

[@projectfinance]

Yes, short puts can be held overnight, and can also be bought back at any time before expiration. If the put is out-of-the-money (the stock price is above the strike price) at expiration, its final value will be $0. However, it's not an overnight price decrease from your example price of 10rs to 0. As time passes when the put is out-of-the-money, the put's value will gradually decay towards $0 as its expiration date gets closer. So, there might be an opportunity to buy back the put at a cheaper price after a couple days/weeks of it being out-of-the-money, depending on what the stock price does during that time. For instance, if you sell a 30-day put for 10rs and the stock price doesn't move much over the next couple weeks, the put's value might fall to 5rs, at which point you could buy back the put for 5rs and secure a 5rs profit on that short put contract. I think watching our video on theta decay would help with this concept: kzbin.info/www/bejne/pqrUdn1_ecSthdk I hope this helps! -Chris

[@bhairavigadhvi9]

😀Thanks a lot..this was really helpful😊and if the expiry date is on 26th jul 18 thn can i trade on tht day???or the last day is said to be 25th???and if i dont exit before expiry wht happens?? And if i short xyz thn whn it gets 0 i can buy it and exit easily?? Thank you again😀

[@projectfinance]

The last day to trade is before the market closes on Friday before expiration. For instance, the September 2018 expiration cycle in SPY states that the expiration is on September 21st (Friday). That means the last day to trade the September 2018 options is on September 21st before the market closes. If your option gets to $0.00 you will have to buy back the option for $0.01 or $0.02 because you can't buy an option for $0.00. Nobody will sell it to you for free! The only way to get $0 as the final value of your option is for that option to expire worthless (out-of-the-money).

[@bhairavigadhvi9]

Okayy thank youu a lott..thanks again...this was realllyy helpful..!!😀😀😀thank youu sooo soo soo much😀😀😀

[@kobeh2411]

On Robinhood it shows that the break even price of SPY is $321.90 and the strike price is $322.30. If I sell a put that ends on December 31 does that mean that if the price doesn’t go below $321.90 I will make profit and the trade will expire worthless?

[@projectfinance]

The strike price is $322.30? That seems odd to me. Typically, strike prices are even dollar amounts, or in $0.50 increments ($322, $322.50, $323, etc.). But, if the stock price is above the breakeven at expiration, you'll make money on the trade.

[@alexandreturcotte950]

So you absolutely have to purchase the shares . You can’t just take profits.. if you have to purchase the shares but you made a profit. Is that profit deducted on the price you have to pay for those 100shares 👀 Great Explanation! If I’ve understood correctly. This method is to purchase shares at a lower price while making profits 🤷‍♂️

[@alexandreturcotte950]

Coming back after watching other videos on short a put or also known as selling a put. I’m noticing you’re the only one who chooses a strike over the current market price.. other videos are showing to choose a strike under the stock price which you’re betting it won’t hit so you can collect the premiums. Could you clarify because I’m super confused now 😫

[@tortureyou]

Be thankful that a put's max loss stops at zero. Most people that follow the market closely and all the macros that effect it will probably recall when April oil futures went to -37 per barrel. That means if you were short on a WTI contract your max loss was the absolute value of the price you got in minus -$37.

[@mattforman4972]

This entire video discussing single stock options. Single stock options have completely different characteristics and features than options on futures like WTI oil contracts for example the multiplier on the contracts is different, the market is trading 24 hours a day, the leverage and margin requirements are entirely different and not to mention that trading futures could result in taking physical delivery while options on futures do not provide delivery. Let’s stay away from contango vs backward at ion.

[@sabiel888]

It is pretty confusing that apps like Robinhood tell you the max cost is what's being put down for the option (for example 2.24 per 100 shares x 2= $ 448) when in reality you could lose more if your put position actually increases in value (the value is below the breakeven price), because someone can exercise the right to exercise the stock and now you're liable for the full cost of 200 shares ($44,800). I guess if you don't have the liquidity to cover the 200 shares its better to sell at a loss then to be liable?

[@the_game188]

in fact the risk of selling put is you might lose money more than you spent for that trade ????

[@astrosntexans]

you dont spend money up front. you make money as a seller..but yes you can lose more money than you initially made as a seller..

[@antoniowindom]

So I sold 1 put at 4.50 for 1.90 exp 3 days. The stock price is 2.50 and increasing. My break even is 2.60. So I'm money?

[@themaster61]

Yes ... but I’m sure you already know that now Lol

[@haokieto0]

i'm guessing. when you sell put, you let it expire? ...you do not buy to close?

[@projectfinance]

You can buy the put option (closing trade) to secure any profit/loss you have on the trade. You don't have to hold it until expiration!

[@randomness5074]

@@projectfinance Great videos, just wanted to say thanks for all the work you put in. Really helps alot, best Options Videos Explanation on the youtubes. Also, question on buying to close puts, could we sell a put, collect premium, then 2-3days later buy to close it, if say it's at or above the strike price? and we would still keep the full premium???

[@darkspd31]

Try doing this during March 2020 XD

[@projectfinance]

Big ouch!

[@dontswin]

@@projectfinance Yea but, if you got assigned the shares of hundreds of different stocks you're killing it now because those stocks rallied hard off the March 23 low. Rallies of 25%, 30%, 40% are not uncommon now that we see what has happened. Granted, no one really knew that was gonna happen! :^ /

[@AfaanOromostock-]

I still don't get it 🚀😂😂

[@cbro777]

The one thing I wish you had included in this presentation was the amount of capital you have to have in the account to put on these types of Trades. I think that's crucial information to know ahead of time. And of course that amount varies on value of the stock and what it's trading at. So these trades would be easier to do on a $30 stock or $50 stock as opposed to a $200 stock. Correct?

[@Slydeish]

I started my Options Trading with less than $800 and have been generating $70 to $120 a month consistently ever since. I knows it's not much, but it's kinda working.

[@bluesky5587]

Why are your examples selling puts above strike price ? Makes no sense ..I thought whole idea of short put is to keep strike way below stock price so as the option is out of the money and expires worthless.... why would anyone put themselves at a major disadvantage right from the getgo ....I thought u sell puts at minus delta 30 or 16 ...ie sell out of the money and by a lot......as mentioned these examples make no sense to me.

[@Zenbeau]

one thing im confused about. why might someone want to do this over buying puts? when you buy put you have unlimited profit potential, but when you sell puts you dont have unlimited profit potential... you can only make a certain amount of money

[@projectfinance]

Because when you buy a put you need the stock price to fall in a short period of time in order to make money. When selling puts, the stock price doesn't have to move at all and you can make money. Selling puts is a "high probability" strategy which has higher risk than reward. Buying puts is a "low probability" strategy that has more reward than risk.

[@Zenbeau]

@@projectfinance ahh ok i see, thank you for explaining that

[@Tom2312yueyei]

Why are you talking about max loss. If you buy options in a reputable company they will not go out of business in that time frame! What I would like to know is what is the lost potential if the put expires in the money? Is the loss only what you paid to sell the put contract?

[@dontswin]

You don't pay to sell a put contract. You receive a credit ( called premium)when you first sell the contract in so much as there is a buyer of that put option. If the put option expires in the money then you will have to pony up the dough for the 100 shares of the stock minus the premium(credit) you gained in the beginning. The transaction fees will typically be very small (probably under $10) per 1 option. Whoever bought the put initially, a firm or individual will 'PUT' the stock to you, at the strike for the designated price you sold the put at, and you must pay for it. However, it is extremely important to monitor the price action of the stock the closer it gets to expiration so you could 'BUY TO CLOSE' your position and get out of the trade altogether. If the stock tanks the last day, on expiration day, you will get assigned the stock, whereas possibly the day before or several days before you could have locked in profits, IF you 'bought to close' the position. That's why they tell you to only sell(or write) puts on stocks you don't mind owning if it happens. Remember, there still has to be another party to the trade...someone willing to 'buy' the put in the first place or none of this happens anyways. Hope this helps.

[@InspiringThings101]

I think you made this sound more complicated than it actually is.

[@irafanl7739]

Risking 9500 to make 500? Does that even sound smart bro..damn..regardless of the time decay I think its better to buy some ITM calls or puts cuz the risk is predefined and unlimited gains makes perfect sense to me

[@davidcabralfernandes4498]

on a short put the max gain is k- premium not the premium!!!!

[@projectfinance]

That's when you buy a put option, as K - Premium gives us the option's gain less the amount paid for the option in the event of the stock price going to $0. When you sell/short a put option, the maximum gain is the amount you sell the option for, or the premium received.