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Writing puts
Issued on August 06 2010 par Strategies-options.com

Writing puts is a very widespread strategy amongst asset managers, in order to increase the profitability of the funds.
I - A Target

Writing puts allows to cash premiums by pledging to be able to buy an asset at strike price.



II - Benefit

The main advantage is to perceive money in case of a rise or a stable movement on the underlying. They are generally used after having sold an asset for which one has previously defined a lower level where it would be bought back.

Graphically it comes:

Short 1 year 100 put


3D to grasp time decay
3D Short 1 year 100 put


We see that writing put equals the P&L that results of purchasing an asset below the strike price (less the premium). It's then a risky strategy.
Premiums are definitely earned and are the max profit that could be made.



Next : Writing Calls
Previous : Long Put

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BASIC OPTIONS STRATEGIES - INDEX
BASIC OPTIONS STRATEGIES - CHAPTER I
BASIC OPTIONS STRATEGIES - CHAPTER II
BASIC OPTIONS STRATEGIES - CHAPTER III
BASIC OPTIONS STRATEGIES - CHAPTER IV

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