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Strategies & Market Trends : Three Amigos Stock Thread
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To: Ken W who wrote (8099)8/25/1998 10:08:00 PM
From: Sergio H  Read Replies (1) of 29382
 
Ken, selling puts is similar to shorting a stock. Your liability is infinite. That being the case, you're 100 % correct. Selling puts is very risky and not everyone is given clearance to do so. There are financial qualifications that must be met.

Joe's example about the stock dropping below the stock price and therefore allowing the buyer of the puts that you sold to exercise his position.......this btw can be any buyer of puts for the same strike price and expiration date of the same stock, it is arbitrarily decided who gets exercised on prior to expiration, but that is another story.

So, the stock drops below the strike price and you now have to honor the option that you sold. The transaction can be settled in cash or in shares. The brokerage will handle the details.

Sergio

Ps Not all stocks were down. I noticed CYCH attracted a lot of attention today.
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