who is seller of put option and how thay can earn?

Answer 1

Are we talking about stocks here? Oil, bonds, what? There are options on everything, including futures options.

Yes, these answers are way off. You didn't ask for the definition of a Put.

The seller could be anyone, yes, but generally it is a broker/dealer or floor trader or a hedger against stock ownership, like an institution or fund.

Options were designed as a hedging tool, so if used correctly, the seller would be someone who owns the underlying. Speculators selling options is a very risky business, so generally, he would be a professional with deep pockets. The less knowledgeable people get weeded out in a hurry.

The seller of the option hopes it will expire worthless. This is how he makes his money. Since 85% of all options expire worthless, his odds are pretty good, but the risk is still open-ended and enormous; not for the feint at heart.

Answer 2

Wow -- some of these answers are way off base.

A put option is a contract between two parties where the buyer of the contract has the right -- but not the obligation -- to force the seller of the contract to purchase an asset at a set price.

If I sell a put option on a stock to you with a strike price of $30 -- then if the price goes below $30, it would be in your interest to make me buy it at $30. If you have the stock, you can sell it to me. If you don't have the stock, you can buy it at the market price and sell it to me -- or, more likely, sell the contract to someone else. In this event, my profit or loss is the fee I got for selling the option minus the difference between the actual value and $30. If I sold the contract for $3.00 (called the premium) -- then I make money unless the stock price falls below $27.

If the stock price is above $30, then you would be crazy to make me buy it from you at $30 -- so you would choose not to exercise the option. I can then pocket the premium I was paid for selling the option.

Put options can be private contracts (over-the-counter) on the value of any asset. Large financial institutions may enter these contracts with another large financial institution as the counterparty.

Puts can also be bought and sold through the options exchanges. Contracts for stocks are usually for 100 shares per contract. The options exchange acts as the counterparty in all transactions in order to cut down default risk. They will do a simultaneous buy and sell with two different customers.

Nearly anyone can sell a put option.

Answer 3

You can be the seller. A put option gives you the right to sell stock at a set price with a set time frame.

Answer 4

The brokerage firm is often the seller of put options. They earn the commission.