LogFAQs > #962535835

What happens is such. We'll use the prices I said above as an example.

$8 put
2/18
$4.60 price

You get the premium up front. So in my example you'd get $4.60 x 100 or $460 per put.
At any time until expiry, you can be forced to buy BBIG at $8 per share. You must put up $800 in collateral per sold put to account for it.

With those two numbers you're basically buying BBIG at $3.40. $8 per share - $4.60 per share = $3.40 per share.

Because it's so deep in the money you're not really making a lot of value if it doesn't go up, $0.07 share-- not nothing but pretty small. The point is you're still getting it at a slightly better price than you would normally which is the key. If it does go up you make a ton of money.

Honestly though from what I've seen of you (you were getting worried a few days ago when it was hovering at $3), selling puts at $3 or $3.50 seems much better. Like even the $3 put isn't bad-- you make around $0.15 currently (at $3.42) which makes your effective buy in price $2.85 if assigned, and if not you get a cool 5% return on investment.