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I sold a cash secured put for XYZ stock. It is Aug 20, 2021 expiry for $34 Strike Price. The stock was trading at $31.60 when I sold the PUT. I have received $1K premium for selling that option.

  1. If the stock price reaches $35 any day before Aug 20, 2021, will I automatically be assigned 100 shares at $34 stock price, or will I be holding the position until Aug 20, 2021 and the shares will be assigned then if the stock price stays under $34 on that day?
  2. If the stock price increased to $33, can I close the PUT position early, so I don't get the shares assigned?
  3. What is roll an option and what does it do?
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  • In ‘1’ why do you say $35? If the stock trades at $35, no one would put it to you at $34.m
    – JTP - Apologise to Monica ♦
    Feb 13, 2021 at 0:49
  • Not sure what would happen if the stock price goes above the put's strike price at or before expiration. I thought that until the expiration date, the price could fluctuate any which way, but I will be assigned shares only on the expiration date.
    – Jonathan
    Feb 13, 2021 at 1:19
  • You need to understand, to the buyer of that put it only has real value at expiration to the extent the price is below the strike price. In other words I own the stock and it’s trading at 20 for example. That is when I am very happy to put it to you at $34. No offense of course.
    – JTP - Apologise to Monica ♦
    Feb 13, 2021 at 1:21
  • i see.. thanks for the explanation. So, if the stock falls to 20 before expiration, can the buyer assign me shares anytime or do they have to wait until expiration?
    – Jonathan
    Feb 13, 2021 at 1:22
  • Yes. But. The buyer of the put has the right to exercise whenever they wish. The but, is that typically there’s some time premium, so they’d be better off selling that option. And I’m a bit concerned, you are in an option trade without knowing the process a bit better. When I drop $1000, and lose it, I knew how, why, and watch for the next trade.
    – JTP - Apologise to Monica ♦
    Feb 13, 2021 at 2:02

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You can be assigned at any time when you are short an in-the-money option but that is unlikely if the option has any remaining time premium. The exception to this general rule would be if there is a pending dividend and the dividend exceeds an ITM put's time premium (not true for a call).

You can buy to close your short put at any time, ending your obligation to buy the stock.

A roll means that you close your existing put and then either:

  1. Sell a different strike put for the same expiration

  2. Sell a put for a later expiration (same or different strike).

In general, the objective of a short put roll is to bring in an additional credit (a later expiration) and/or sell a lower strike price (same or later expiration) both of which lower your risk.

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  • If I Buy to close, will i need to return the premium, I accrued?
    – Jonathan
    Feb 13, 2021 at 0:33
  • No. You buy it at the market price, it could be higher, or lower. The premium you got is what will decide if you have a gain or loss.
    – JTP - Apologise to Monica ♦
    Feb 13, 2021 at 0:54

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