What is the effect of selling a Put Option?

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• What is the effect of buying a Put Option?

  The buyer of the put option has the right, but not an obligation, to buy the underlying asset at the strike price at expiry. The buyer of a put option has to pay a premium to the seller for the privilege.

• What is short selling?

  Short selling is a trading strategy that involves borrowing and selling a security that you do not own, hoping to buy it back later at a lower price and make a profit. It is a way of trading with the anticipation on the decline of a security’s price. ...

• What is the effect of selling a Call Option?

  The seller of the call option has an obligation to sell the underlying asset at the strike price if the buyer of the call option chooses to execute his right. The seller receives a ‘Premium’ from the buyer.

• What is In The Money (ITM) Put Option?

  A put option is said to be ITM when the underlying security’s current market price is lesser than the strike price of the contract.

• What is Out of the Money (OTM) Put Option?

  A put option is said to be OTM when the underlying security’s current market price is greater than the strike price of the contract.