New answers tagged put-options
0
Given this is an exchange traded option, the exchange contract specification should state exactly what would or could happen.
http://www.cboe.com/products/stock-index-options-spx-rut-msci-ftse/s-p-100-index-options-oex-xeo/oex-specifications
It doesn't seem to state that out of the money exercise is prohibited, so perhaps you can do it and pay the loss ...
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First of all, there's no way a put that's 4.50 in the money is only selling for 4.20. You must be looking at stale prices. But that said, you still have your strategy backwards.
If you sell a put, then you're obligated to buy more shares at the strike price (the other side has the option to sell). So assuming the stock stays below $7, you'd get $4,200 now, ...
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