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EDUCATION ONLY
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The seller of a put option must have collateral in his brokerage account before selling a put option.
He is selling a Microsoft put option with $184 share price. The investor elects $180 strike price and deposits $18,000 in his brokerage account as collateral.
The investor collects the option premium of $100 when he places the sell order.
(1) The Microsoft share price is $181 at maturity date.
The investor recovers the $18,000 collateral since the share price is higher than the $180 strike price.
(2) The Microsoft share price is $175 at maturity date.
The investor loses the $18,000 collateral since the share price is lower than the $180 strike price.
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