A put is the right to sell a stock. If you sell a put you are promising the buyer that they can sell the stock at the strike price (provided the actual price is below the strike).
Easy way to remember - Call Up, Put Down
Can be used as an income strategy too. Sell puts on stocks you would be happy to buy at a lower price. There is risk involved if the market falls really hard and you have to buy above the market. Example last week, Nvidia dropped 10% in the afternoon of April 19. My put sold at strike $800 went very ugly and went up by $35 (more than the 10 %) and my broker forced the buy back as he felt there was not enough margin in the account. That realised the loss immediately - too bad that I was confident price would trade above $800 in the medium to long term.
A put is the right to sell a stock. If you sell a put you are promising the buyer that they can sell the stock at the strike price (provided the actual price is below the strike).
Easy way to remember - Call Up, Put Down
Can be used as an income strategy too. Sell puts on stocks you would be happy to buy at a lower price. There is risk involved if the market falls really hard and you have to buy above the market. Example last week, Nvidia dropped 10% in the afternoon of April 19. My put sold at strike $800 went very ugly and went up by $35 (more than the 10 %) and my broker forced the buy back as he felt there was not enough margin in the account. That realised the loss immediately - too bad that I was confident price would trade above $800 in the medium to long term.