Short Put

Psychology:

The short put (or naked put) is a strategy the involves selling a put contract. The short put is most suitable when an investor is bullish toward the underlying asset’s share price and bearish toward the underlying asset’s volatility. The short put is similar to a short call option contract in that selling naked put contracts has the potential to become more risky as the price of the underlying asset goes down. The short put is beneficial when the underlying asset is on an upward swing. One nice thing about a naked put is if you are assigned the stock you can turn around and write covered calls on it.

Risk / Reward:

Maximum Loss: Unlimited as the underlying asset’s price falls.

Maximum Gain: Limited to the total premium obtain when selling the put option contract.