Short Put

Description

Selling a Put option, expecting the price not to fall.

Trading Logic

Earn premium. If price drops significantly, obligated to buy stock at strike.

Practical Example

Stock at $100. Sell a $90 Put for $2 premium.

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P/L Curve

Chart Description
  • X-Axis: Stock price at expiration
  • Y-Axis: Expected P/L ($)
  • Green area: Profit; Red area: Loss