DEFINITION of 'Put To Seller'

The exercise of a put option. Put to seller would usually occur when the strike price of the put is lower than the market value of the underlying security. At this point, the seller would have the option, but not the obligation to sell the asset to the option writer for a higher price than what is currently dictated by the market.


For example, consider a situation where an investor buys puts to hedge downside risk in his or her position in stock A. The investor buys three-month puts on A with a strike price of $25 and pays a premium of $1.50 (for example). The put seller or writer who earns the premium of $1.50 assumes the risk of buying A from the investor if it falls below $25. Towards the end of the three-month period, if stock A is trading at $22, the investor will sell stock A to the put writer, and receive $25 for each share of stock A.

  1. Seller

    A seller is an entity who writes an option contract and collects ...
  2. Writer

    The seller of an option who collects the premium payment from ...
  3. Naked Put

    A naked put is an options strategy in which the investor writes ...
  4. Options Contract

    A contract that allows the holder to buy or sell an underlying ...
  5. Put On A Put

    One of the four types of compound options, this is a put option ...
  6. Premium Income

    1. In investing, income that is earned through the sale of an ...
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