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.\u00a0\u00a0A\u00a0Short Put\u00a0strategy might be considered by a risk-tolerant trader with the opinion that a stock\u2019s price\u00a0is likely to increase\u00a0and\/or volatility is likely to decrease.\u00a0 The put\u00a0seller benefits\u00a0from the passage of time and decreasing dividends.\u00a0\u00a0\u00a0The maximum gain is the premium received, which occurs at any price\u00a0above\u00a0the strike price.\u00a0 The gain diminishes as the price of the underlying falls below the strike price.\u00a0 Breakeven occurs at the sum of the strike price less the premium received.\u00a0 At any price below that, the short put seller begins to lose money penny-for-penny as the underlying price decreases.\u00a0 Loss potential is substantial.\u00a0 Short put sellers must ensure that they are sufficiently capitalized to deliver any required shares.<\/p>\n
Short Put Example:<\/strong><\/p>\n Market Outlook – Bull<\/p>\n Volatility View – Premium decreases<\/p>\n Time Erosion – Premium decays<\/p>\n Dividends – Premium decreases<\/p>\n Interest Rate – Premium increases<\/p>\n Profit Potential – Limited<\/p>\n Loss Potential – Substantial<\/p>\n Components- Sell put option<\/p>\n An investor might use a short put option position when the share price or market is expected to rise.<\/p>\n","protected":false},"author":850,"featured_media":221421,"parent":0,"comment_status":"open","ping_status":"closed","template":"","meta":{"_acf_changed":false,"footnotes":""},"contributors-categories":[13576],"traders-academy":[13126,13128,13132],"class_list":["post-175924","trading-lessons","type-trading-lessons","status-publish","has-post-thumbnail","contributors-categories-interactive-brokers","traders-academy-intermediate-trading","traders-academy-level","traders-academy-trading-lesson"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"\n\n
\n\n
\n Underlying Stock<\/td>\n \u00a0$\u00a0\u00a0 60.25<\/td>\n <\/td>\n Underlying Stock<\/td>\n Profit & Loss<\/td>\n<\/tr>\n \n Short Put Strike<\/td>\n \u00a0$\u00a0\u00a0 57.50<\/td>\n <\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 10.00<\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0 (4,550.00)<\/td>\n<\/tr>\n \n Premium<\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0 2.00<\/td>\n <\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 20.00<\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0 (3,550.00)<\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 25.00<\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0 (3,050.00)<\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 30.00<\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0 (2,550.00)<\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 35.00<\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0 (2,050.00)<\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 40.00<\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0 (1,550.00)<\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 45.00<\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0 (1,050.00)<\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 50.00<\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 (550.00)<\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 55.00<\/td>\n \u00a0$\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 (50.00)<\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 57.50<\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 200.00<\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 60.00<\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 200.00<\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 70.00<\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 200.00<\/td>\n<\/tr>\n \n <\/td>\n <\/td>\n <\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 80.00<\/td>\n \u00a0$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 200.00<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"