Short Put Risk Profile
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Stock Price
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$77.00
|
|
Put Premium
|
5.58
|
|
Exercise Price
|
80.00
|
|
Time to Expiration
|
4 months
|
Remember that we already discussed the implications of selling an option - here's another reminder for puts:
Selling (naked) imposes the obligation
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Selling a put obliges you to buy the underlying asset to the option buyer. Remember, when you sell a put, you have sold the right to sell to the person who
bought that put.
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Selling options naked (ie when you have not bought a position in the underlying instrument or an option to hedge against it) will give you an unlimited risk profile. The continuous
downward diagonal line is generally a bad sign because it means uncapped risk.
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Combined with the fact that you are obliged to do something, this is not an ideal strategy for the inexperienced.