What's next for a Short Put？
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How to set up a Short Put on moomoo？
After selling a put option, what might the trader do? | |
Option 1: Take no action | 1、Buyers do not exercise the options Your Profit = Option Premium * Contract Multiplier * Number of Contracts Option buyers can choose to exercise early or at expiration. Generally, if an option is out-of-the-money, the buyer won't exercise it. If buyers don't exercise their options, you won't need to buy the shares, and no action is required. 2、Buyers exercise the options If your short option is in-the-money option on the expiration date, you will most likely be assigned. If you are not assigned, you are not required to fulfill your obligation to buy the stock. If you are assigned to fulfill an exercise obligation, please refer to the following: Your Profit or Loss = (Premium Earned+ Current Stock Price - Strike Price) * Contract Multiplier * Number of Contracts This profit/loss would be on paper because you would be taking on the shares of the associated underlying stock. To realize the profit/loss, you would have to then sell the shares of the stock. If the account has sufficient margin/cash: The system will automatically use the margin/cash in the account to buy the underlying stock from the option buyer at the strike price. If you were holding a short put position that was exercised, you would then be put long the equivalent number of shares of the underlying stock which you could choose to hold or sell to close to exit the position. If your account neither holds the underlying stock nor has sufficient margin/cash: Your account will be marked as "dangerous", moomoo Financial Inc. reserves the right to liquidate your option position. |
Option 2: Close the position | Close the position before expiration to stop profit or stop loss Your Profit or Loss = (Premium Earned - Closing Premium) * Contract Multiplier * Number of Contracts The method is similar to buying a put option: you only need to repurchase the previously sold position. |
Option 3: Rollover | Close the current option position (realizing any gains or losses) and open a new option position May be done in an effort to manage risk or increase potential profit. |
This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. Read more
