Hi, Casey Jensen here again at OptionsANIMAL. Now we’re going to delve into a short put. What is a short put? Well, again, when we’re shorting we’re selling. This time we’re selling a put option. Anytime we sell, we have an obligation. Let’s talk about that obligation.
If we choose the month of September, it has 45 days to expire. SP, short for Short Put. Strike price 95 so what is my obligation? Well, in this case, if the stock’s at 100, let’s say it drops to 80, I’m going to be obligated to buy the stock at 95. I’m down $15 a share. You might say, “Well, why would someone do this?” Well, you get paid a premium for it. You can make a nice income doing this way of trading, you take on a little bit of risk. In future videos, we’ll talk about how to negate that risk using a few other options with you or perhaps stock ownership.
The easy way to remember this one is a put if you’re selling it, you’re going to be put the stock to you. The stock will be put to you at whatever price you choose, in this case, 95.