{"id":15364,"date":"2022-12-29T05:02:00","date_gmt":"2022-12-29T05:02:00","guid":{"rendered":"https:\/\/businessyield.com\/?p=15364"},"modified":"2023-01-31T16:24:35","modified_gmt":"2023-01-31T16:24:35","slug":"sell-put-options","status":"publish","type":"post","link":"https:\/\/businessyield.com\/business-strategies\/sell-put-options\/","title":{"rendered":"Sell Put Options: Overview with Options Trading Examples","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"\n

Introducing options trading into all types of investment strategies has quickly grown in popularity among individual investors. For beginners, the major question that will arise is why traders would wish to sell options rather than to buy them. However, the selling of options confuses many investors because of the obligations, risks, and payoffs involved. They are different from those of the standard long option. Here will see the strategies of selling put options explained with examples and how to calculate using the put options calculator.<\/p>\n\n\n\n

Selling a put option allows an investor to potentially own the underlying security at a future date and a much more favorable price. In other words, the sale of put options allows market players to gain bullish exposure, with the added benefit of potentially owning the underlying security at a future date and a price below the current market price. Selling a put option can also be called writing a put option.<\/p>\n\n\n\n

How Does a Put Option Work?<\/h2>\n\n\n\n

A put option gives you the right, but not the obligation, to sell a stock at a particular price (known as the strike price) at a specific time, at the option\u2019s expiration. As a result, the put buyer pays the seller a sum of money called a premium. In contrast with stocks, which can exist indefinitely, an option will expire at expiration and then be settled, with some value remaining or completely worthless.<\/p>\n\n\n\n

Therefore, put options are in the money when the stock price is below the strike price at expiration. The put owner may exercise the option, thereby selling the stock at the strike price. Otherwise, the owner can sell the put option to another buyer at fair market value.<\/p>\n\n\n\n

A put owner makes a profit when the premium paid is lower than the difference between the strike price and stock price. Imagine a trader buying a put option for $0.70 with a strike price of $35 and the stock is $20 at expiration. The option is worths $15 and the trader has made a profit of $4.10.<\/p>\n\n\n\n

If the stock price is higher than the strike price at expiration, the put is out of the money and expires worthless. So, the put seller keeps any premium received for the option.<\/p>\n\n\n\n

Why Sell a Put Options?<\/h2>\n\n\n\n

In options trading, you can be a buyer or a seller. Here are the advantages of selling puts.<\/p>\n\n\n\n