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Selling Short Uncovered SPY Put Options.

By selling short a SPY put option, you are giving an option holder the right to sell an SPY stock strike price. Option sellers have obligations, yet, he/she receive options premium from an options buyer for these obligtions. The uncovered SPY options seller keeps this premium as a profit if the option expires worthless. A trader who sells put options believes the market will rise.

• In order to make money on a short SPY put sale, the price of the SPY stock must stay above the put strike at expiration date. The maximum profit the put seller can recive is limited to the premium received for the sale of the puts contracts.
• Should the price of the SPY shares fall below the strike at expiration, the put option holder may then choose to exercise it. If the SPY put options holder decides to exercise his right, the put seller is obligated to buy the SPY stock at the strike price.

SPY put seller may profit in flat and rising markets. If at expiration date the price of the SPY stock remains above the strike price of the SPY put option, the put will expire worthless and options seller will benefit by keeping the 100% of the premium as profit.