1. What it is
Sell one put and reserve the cash required to purchase the contract's underlying quantity at the strike.
2. Why use it
Receive premium while reserving cash to buy the underlying if assigned.
3. How the numbers work
View example
- Sell 1 × Put · Strike 95
- Option premium received
- 2
- Expiration breakeven
- 93
- Maximum expiration profit
- 2
- Maximum expiration loss
- 93
- Underlying at expiration 100 → Profit 2
- Underlying at expiration 110 → Profit 2
4. How it changes
A short put has positive delta, negative gamma and vega, and usually positive theta. A sharp decline with rising IV can hurt both price and volatility exposures.
5. What to watch for
Assignment can make you buy well above market value. Cash collateral funds the obligation; it does not prevent losses.
Only call the position cash secured when the required cash is actually available. Model the result of owning the assigned shares.
Examples use illustrative entry prices and amounts per underlying unit, before costs. Contract amounts require the contract multiplier. Expiration payoffs assume the illustrated legs remain intact; earlier position values and exercise or assignment outcomes can differ.