A Short Put is a options trading strategy in which an investor sells a put option, which gives the buyer the right to sell a specific amount of an underlying asset (such as a stock) at a specific price (strike price) within a specific time frame (expiration date).When an investor takes a short put position, they are obligated to buy the underlying asset at the strike price if the buyer of the put option chooses to exercise the option. In exchange for this obligation, the investor receives a premium from the buyer of the put option. The investor hopes that the underlying asset will not decrease in value to the point where the buyer of the put option would want to exercise the option and force the investor to buy the asset at the strike price.For example, if an investor believes a stock is currently undervalued and is likely to increase in value, they might take a short put position by selling a put option with a strike price of $50. If the stock price remains above $50, the buyer of the put option will not exercise the option and the investor will keep the premium. If the stock price falls below $50, the buyer of the put option may exercise the option and force the investor to buy the stock at $50.Short put position can be a way for the investor to earn income from options trading, but it also comes with risks. If the stock's price falls significantly below the strike price, the investor may incur significant losses. Additionally, if the stock goes bankrupt or gets delisted, the investor will be forced to buy the stock at the strike price even if it's worthless.It's important to note that options trading is a highly speculative and risky strategy and it's not suitable for all investors. It requires a high level of knowledge and expertise to be able to predict the market correctly.
