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Strategies & Market Trends : Tech Stock Options
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To: Henry D who wrote (58377)3/14/1999 12:02:00 PM
From: broken_cookie   of 58727
 
what is a short equity put option

A short equity put option is when you "write" or sell a put option on a stock. It obligates you to buy 100 shares of stock at the strike price if the option expires in the money or if the stock is put to you while the option is in the money. It is considered a long position.

You collect the cost of the option and are usually betting that the stock will be >= the strike price at expiration. Margin requirements vary but I believe the minimum is 20% of the underlying stock and the cost of the option. Unlike a call, it cannot be covered - margin requirementwise anyway.

It is a versatile tool and can be combined with other option trades in a variety of ways.

You can learn a fair amount about options at cboe.com . A fantastic reference is "Options as a Strategic Investment" by Lawrence McMillan.

Personally, I do not short puts in stocks that I do not want to own.

Good luck in your trades.
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