Short Put Options Strategy Explained
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Editor’s Note: If you’d like to buy a stock at a lower price than it’s currently offered on the market while getting paid to wait until it drops, you should consider a short put strategy.
A short put can be confusing because you’re short an option that people naturally view as a short position anyway. Traders who purchase put options expect the price of the underlying security to go down.
When you’re short a put, though, you’re expecting the exact opposite. You want the underlying stock to increase in value. In fact, if the stock drops significantly below the strike price, you could lose a lot of money. However, if the stock stays above the strike price, you stand to make a nice profit.
In this guide, I’ll explain the short put strategy in detail so you can determine if it’s right for you.
This post originally appeared at Investing Daily.
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Category: Options Trading Basics
