One of the most popular and basic option strategies in which an inherently bullish investor attempts to capitalize on the potential upward movement of an underlying by taking a short position in put options. Writing a put option obligates the investor to sell the underlying at the preset strike price any time until expiration. Put another way, a put is short when it is written or sold to another investor. The maximum gain from a short put is only limited to the premium received by the seller. However, potential losses would be significant when the underlying follows a downward path. In general, there are two basic types of short puts: covered puts and naked puts.
Writing a put has the same risk-reward characteristics as a covered call position.
A short put is also known as a put-write.
