- Solve real problems with our hands-on interface
- Progress from basic puts and calls to advanced strategies
Interactive Options Course
Lesson 4 of 11
An investor selling a put option receives a fixed premium and gives another investor the right but not the obligation to sell an asset at a predetermined price until expiration. A Short Put strategy might be considered by a risk-tolerant trader with the opinion that a stock’s price is likely to increase and/or volatility is likely to decrease. The put seller benefits from the passage of time and decreasing dividends. The maximum gain is the premium received, which occurs at any price above the strike price. The gain diminishes as the price of the underlying falls below the strike price. Breakeven occurs at the sum of the strike price less the premium received. At any price below that, the short put seller begins to lose money penny-for-penny as the underlying price decreases. Loss potential is substantial. Short put sellers must ensure that they are sufficiently capitalized to deliver any required shares.
Short Put Example:
Market Outlook – Bull
Volatility View – Premium decreases
Time Erosion – Premium decays
Dividends – Premium decreases
Interest Rate – Premium increases
Profit Potential – Limited
Loss Potential – Substantial
Components- Sell put option
| Underlying Stock | $ 60.25 | Underlying Stock | Profit & Loss | |
| Short Put Strike | $ 57.50 | $ 10.00 | $ (4,550.00) | |
| Premium | $ 2.00 | $ 20.00 | $ (3,550.00) | |
| $ 25.00 | $ (3,050.00) | |||
| $ 30.00 | $ (2,550.00) | |||
| $ 35.00 | $ (2,050.00) | |||
| $ 40.00 | $ (1,550.00) | |||
| $ 45.00 | $ (1,050.00) | |||
| $ 50.00 | $ (550.00) | |||
| $ 55.00 | $ (50.00) | |||
| $ 57.50 | $ 200.00 | |||
| $ 60.00 | $ 200.00 | |||
| $ 70.00 | $ 200.00 | |||
| $ 80.00 | $ 200.00 |
For specific platform feedback and suggestions, please submit it directly to our team using these instructions.
If you have an account-specific question or concern, please reach out to Client Services.
We encourage you to look through our FAQs before posting. Your question may already be covered!
The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Interactive Brokers, its affiliates, or its employees.
Options involve risk and are not suitable for all investors. For information on the uses and risks of options, you can obtain a copy of the Options Clearing Corporation risk disclosure document titled Characteristics and Risks of Standardized Options by going to the following link ibkr.com/occ. Multiple leg strategies, including spreads, will incur multiple transaction costs.
Hello, thank you for the great lessons. I think there are a few typos here in the chart at the bottom. Leftmost column row 2 should be “Short Put Strike” instead of “Long Call Strike”. Also the rightmost column row 10 should be “(50)” instead of “50”.
Hello Anonymous, nothing makes us happier than satisfied customers. Thank you for pointing out those typos. We learn so much from clients like you!
understand good
Will you put shares when you reach the strike?
Thank you for asking. For this order type, an investor selling a put option receives a fixed premium and gives another investor the right but not the obligation to sell an asset at a predetermined price until expiration.
after I sold a put option, what will happen when the stock price is below the strike price when expired? I will just bear the loss? or I am forced to buy the stock at the market price? Or I have a choice to bear the loss or purchase the stock? Can I design the option such that at the expiry day, if the price fall below the strike price, IBKR will automatically exercise the option and buy the stock for me? This saves me the trouble to manually buy the stock?
Hello, thank you for reaching out. In the case of U.S. securities options, the OCC will automatically exercise any option that is in-the-money by at least $0.01 unless you provide contrary exercise instructions. For non-U.S. options, please refer to the Options Exercise page of our website for information on how the different clearinghouses will handle the exercise: https://www.interactivebrokers.com/en/trading/delivery-exercise-actions.php
You can review more details here: https://www.ibkr.com/faq?id=52483599
Hello, Im not sure why I can’t buy a Bull Spread? If the risk is limited meaning I will have to buy shares once they will be below strike on expiration day, but in the same time I bought put option so I will have the right to sell them further for the e.g. lower strike price, why do I get this error mssg: WE CANNOT ACCEPT THIS ORDER. YOU MUST HAVE AT LEAST XXX IN YOUR ACCOUNT TO OPEN OR INCREASE AN UNCOVERED OPTION POSITION? Even though I do have settled cash on my accounts which exceeds the maximum loss of the transaction. Is it because the order need to be placed first, so first after both orders are executed (combo sell put buy put) the risk is limited?
Thank you for contacting IBKR. To address your concern/inquiry, we need a few more details about the situation and your account; unfortunately, IBKR Campus is not a secure channel to share this information. We kindly ask that you contact our Client Services team for further assistance via web ticket, live chat, or phone call using the link below. We appreciate your understanding.
https://spr.ly/IBKR_ClientServicesCampus
I am trying to determine the margin requirements if I sell a SLV Put. If I want to sell 10 SLV Aug08 ’25 for $1, 123, the platform shows “Sell 10 SLV for about ~ 1,123.71 USD”. Is it 10 option positions or 10 SLV positions? Does my account need to maintain the full amount in case I am assigned the SLV positions?
Hello, thank you for asking. To preview margin requirements and potential commissions before submitting an order, use the Check Margin Impact feature. Please view this FAQ for instructions:
https://www.interactivebrokers.com/faq?id=27271532
We hope this information is helpful!
I dont understand how IBKR displays my P+L when I am selling puts, or where I can see the premium added to my account? Whenever I have sold puts, I don’t see my account balance go up and whats displayed in my p+l doesnt make sense – would love you to explain thanks!