A put is a type of option where the holder has the right, but not the obligation, to sell a security at a specified price within a specified time period. The holder of a put will profit if the price of the underlying security falls below the strike price before the expiration date. The writer of a put will lose money if the price of the underlying security falls below the strike price. What happens if you sell a put and it gets exercised? If you sell a put and it gets exercised, you will be obligated to buy the underlying security at the strike price. What happens when you buy a put option? When you buy a put option, you are buying the right to sell a stock at a certain price within a certain timeframe. If the stock price falls below the strike price of the put option before the expiration date, you can exercise your option and sell the stock at the strike price, even if the current market price is lower. If the stock price does not fall below the strike price before the expiration date, the option expires worthless and you lose the premium you paid for the option.
What happens if I don't sell my put option? If you don't sell your put option, you still have the obligation to buy the underlying security at the strike price if the option is exercised. If you don't think the stock price will fall below the strike price before the expiration date, you might want to hold onto the option and hope that it expires worthless. On the other hand, if you think the stock price is going to fall below the strike price, you might want to sell the option to avoid having to buy the stock at an unfavorable price. How do you close a put option? When you close a put option, you are selling the option back to the market. The price you receive for the option will be determined by the current market price of the underlying asset, the strike price of the option, and the amount of time left until expiration. If the current market price of the underlying asset is below the strike price, the option will be "in the money" and will be worth more than it would if the market price were above the strike price. If the current market price of the underlying asset is above the strike price, the option will be "out of the money" and will be worth less than it would if the market price were below the strike price. The amount of time left until expiration will also affect the price of the option, with options that are closer to expiration being worth more than options that are further from expiration. What happens when you sell a put option and it expires? If you sell a put option and it expires, the option writer is obligated to buy the underlying security from the option holder at the strike price.