The Short Put
The moving parts of a short put have scared off many investors. Let's clear up misconceptions so traders can take advantage of the benefits
Sometimes investors feel certain a stock won’t go down but aren’t very bullish on it. That’s when it’s time for a short put.
A short put is a bullish strategy that profits if the underlying moves up. However, a stock’s movement isn’t the only variable that affects a short put. In fact, a short-put trader should pay attention to changes in implied volatility, changes in directional exposure, time decay and the date of expiration.
Keeping track of all of those metrics can seem daunting at first, but over time investors find that the short put becomes one of the most versatile strategies in the toolkit, especially in periods of high implied volatility.
To visualize the difference between buying stock and shorting a put, take...
