What Does "selling Put Options" Mean?

What Does "selling Put Options" Mean?

What Does "selling Put Options" Mean?

Selling a put option is a type of securities contract that permits the buyer to sell a given quantity of a security at a particular price until the contract expires. The contract obliges the seller to buy but does not require the buyer to sell, says The Options Guide.

In return for undertaking the risk of the obligation, the seller of the put option receives a premium from the buyer. As a strategy, sellers make money by collecting these premiums. Given that buyers of puts tend to be taking a bearish stance on the underlying investment, the seller of a put is more likely to approach the same investment with a bullish or neutral stance, reports optionMONSTER.