Put option - Wikipedia

A short put is a type of strategy regarding the selling of a put option. The option itself is a security in its own right, as it can be purchased and sold.

If an investor writes a put option, the investor is obligated to purchase shares of the underlying stock if the put option holder exercises the option, or if the option expires in the money. A short put position is effectively a form of insurance, guarding the investor against losses beyond a certain point.

The higher the price rises, the more money the investor makes. The upper bound on the losses is the value of the stock. When an investor enters into a short put strategy, he is locking the price of an underlying security at the strike price and keeping the premium for writing the put option. Entering into a short put position is considered a risky strategy because an investor is bound by a profit limited to the premium received for selling the put option. However, he is exposed to a higher potential loss only bounded by the strike price of the naked put option minus the premium received, because the underlying stock price can only go to zero.

However, the investor does not have enough cash to purchase the underlying stock. To understand the basics of selling put options, see " Introduction to Put Writing. Dictionary Term Of The Day.

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What is a 'Short Put' A short put is a type of strategy regarding the selling of a put option. Short Put Mechanics A short put position is effectively a form of insurance, guarding the investor against losses beyond a certain point.

European call and put options, The Black Scholes analysis.

Risk When an investor enters into a short put strategy, he is locking the price of an underlying security at the strike price and keeping the premium for writing the put option. Long Put Bull Put Spread Stock Option Put On A Call Put Compound Option In The Money Option Married Put.

Short Put Definition | Investopedia

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