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7 Tips for Mastering Put Selling

An attractive strategy for both options and stock traders

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Tip #2 – Be Prepared for Assignment

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Remember that selling a put obligates you to buy the shares if the put buyer chooses to exercise his or her option. Therefore, if you can’t afford to buy all the underlying stock under your sold put contracts, you should either reduce the number of contracts sold or avoid the strategy altogether.

Since assignment will inevitably occur on some of your positions, make sure that the underlying stock is one that you would have no qualms about owning. Of course, you can close a position early by buying back your put (at a higher price than you sold it). But always be prepared for assignment, since you’re not entirely in control of your position.

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