Contracts can be written many different ways. The market adjusts for early exercise by making American style options more expensive than European options.
None of this makes any sense.. You short a stock at 500,it's down significantly, and you sell a 497 put for 3 dollars? Huh?? What do you consider a significant down move on a 500 dollar stock?? You want to keep selling puts against your short until you think the stock will go up?? Good grief
Your headed in the right direction,but the odds of him selling an ITM put for 3 dollars on a 500 dollar stock seems dubious at best.. It appears he sold the 497 put,the question is when..He couldnt have shorted stock at 500,it sells off and he sells a put for 3..Sounds like he may have sold the put first
If you received $3 for a 497 strike put, then price must have come down to around 494. After what went down, the stock price or the value of the put? You are talking about doing this until the trend changes, so I'm assuming the stock dropped more? In that case for you to receive $5 it would have to be a 499 strike if you received $3 for a 497 strike...but you said it went down so lets say price is now 492 so you sold another 497 strike for $5, but have to pay $5 to close your existing 497 short put so you net $3 either way. What's the point? I know one can sell covered options itm to lock in profits if they don't want to sell right away...maybe a dividend coming up etc but also protect from losing gains in case of a reversal...is that what you are trying to do?
Are you NUTS??? Its a 500 dollar number.do you really think "the price must have come down to around 494" to receive intrinsic on a 497 strike??? How many minutes have you been at this?? Poopy,where you at? Cmon bro,this is Elite Trader!!!!!!!