Short Put options strategy is just opposite of Short Call Options Strategy . Short Put means Sell Put options or Sell PE. So this is basically options selling as they say. We have already discussed Call Options selling and in Short Put we will discuss the Put Options Selling. These two together makes basic fundamental operations you can have in Options Selling World.
Later when we discuss the other strategies you will see that those are combination of Selling and Buying. With combinations of these fundamental operations people construct further strategies. So one has to understand the basics operations or concepts of these before diving into next ones.
You can watch either the English Video or Hindi Video to understand the strategy in details.If you are new to Options trading then I would suggest you to watch or read the Getting Started tutorial on Options . That will help you understand the strategies as well. Below videos explain key concepts like
- Margin required for Selling Put
- Selling put as bullish strategy
- Situations in which you can use Put Sell
- Risks associated with Short Put
English Video
Hindi Video
Conclusion
Short Put is somewhat more riskier to Short Call. The reason is Stock Price rise or Index price rise is less swift compared to Index or Stock price falls. Compare it with Human psychology that Fear always triumphs over Greed. Here Fear causes crashes and greed causes appreciation in prices.
In case of unfavorable events you will see sharp knee jerks reaction of markets which may cause huge losses to Traders having positions with Short Call. The margin requirements also make things worse if not properly planned. So it is better to stay away from it in beginning of the trading ans practice once you have full understanding of the consequences.
Selling Put is bit risky strategy as prices melt down faster then it moves up. In case of any unforeseen scenarios you will witness the prices moving down at brisk rate causing huge loss to traders. Also the margin requirement is very much for a Seller. The Put Sell is not so intuitive to understand as you are selling something which you do not own. This counter intuitive measure is very important to understand as majority of Options trading techniques which we will see later on are combination of both buying and selling.
You should watch the videos time and again to gain insight and complete understanding of all the basic concepts which we discussed so far so that you can have complete understanding of the concepts before moving up with complicated techniques.