Put Short

Market expectation

A put short is a good idea if you expect prices to remain stable or rise slightly.

You should choose your puts depending on your market expectations. The more positive these expectations are, the further the puts may be "in-the-money" when sold.

Profit potential

In the case of a put short, the maximum profit is the option premium received on the sale.

The break-even point for the put short is the strike price minus the premium, i.e. the price of the underlying may not fall any lower. In the illustration, this is the intersection with the horizontal line at profit 0.

Risk of loss

The maximum loss is virtually unlimited, as the loss increases in proportion to the falling price of the underlying. The lower the price on the expiry date, the higher the loss, which then corresponds to the intrinsic value of the put.

Time effect

The put short benefits from a decreasing remaining term, as in this case you are a writer.

Volatility effect

If the volatility of the underlying increases during the remaining term, the risk that the price will develop unfavorably increases. The put increases in value, i.e. for the short position this means that a higher price must be paid when the position is closed.