The converse strategy to the Long Put. The short put strategy involves the selling of put options. Selling of put options is more commonly known as put writing.
Before expiration and assignment
The diagrams and worked outcomes describe expiration payoffs, not an option’s market price before expiration. Time decay, implied volatility, rates, dividends and bid-ask spreads affect early closing values. American-style short options can be assigned early; a protective long option is not automatically exercised when a short leg is assigned. Closing or exercising one leg can change the remaining position’s risk.
Payoff summary
Maximum profit: The premium received.
Maximum loss: Strike price minus the premium received, if the stock falls to zero.
Breakeven
Strike price minus the premium received, provided the result is zero or above.
Amounts are per share before fees. Multiply by the shares covered by the position; standard equity options usually cover 100 shares per contract. If a maximum profit or loss calculation gives a negative amount, use zero. These figures assume matching contracts held to expiration and do not include financing or early assignment.
