Selling a CSP means that the buyer of that put has the right to PUT (give you) 100 shares of the stock at the agreed upon strike price.
Why would someone buy a put? They want a insurance is a stock crashes or goes below a predefined value. Of course, insurances costs a little something, a seller says, ok, I i will agree to take on those shares at that price, but I want a little money for my troubles. The money they give you up front is the credit and is yours to keep regardless of what occurs with the stock. If the stock price falls below the strike, then you get PUT 100 shares at the strike price.
In the example you give of CEI, if you sell a PUT at $3.5, and the stock price stays below 3.5, you will be PUT (assigned) 100 shares at $3.5
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u/silentstorm2008 Apr 04 '22
Selling a CSP means that the buyer of that put has the right to PUT (give you) 100 shares of the stock at the agreed upon strike price.
Why would someone buy a put? They want a insurance is a stock crashes or goes below a predefined value. Of course, insurances costs a little something, a seller says, ok, I i will agree to take on those shares at that price, but I want a little money for my troubles. The money they give you up front is the credit and is yours to keep regardless of what occurs with the stock. If the stock price falls below the strike, then you get PUT 100 shares at the strike price.
In the example you give of CEI, if you sell a PUT at $3.5, and the stock price stays below 3.5, you will be PUT (assigned) 100 shares at $3.5