Selling puts

Discussion in 'Options' started by fogut, Dec 30, 2008.

  1. fogut


    It is very critical to know that if the stock were to go below the strike price "before the expiration day", it may not mean anything. In other words, everything typically hinges on the price of the stock the day of expiration.

    It makes sense that the option buyer would want to take advantage of his right to hold off on the decision until the expiration. Since I have not done this kind of a trade, I am not sure what happens.

    Worst case scenario : If you are short the stock and if it starts going up, you take a loss and decide to exit. Then it starts falling again and go below your strike price and you are either stuck with buying the puts at a lower price or get exercised the stock. Is this correct ?

    Thanks a lot for your help.
    #11     Dec 30, 2008
    #12     Dec 30, 2008