A rising price for the contract item will lead to rising losses for the holder of a short position in a put option.

Question

Quizplus · Accepted Answer

A short position in a put option establishes the obligation to buy the contract item at a fixed price (the strike price). Therefore, if the price for the contract item rises, the holder of the put option is not affected because they can simply choose not to exercise the option. It is the writer/seller of the put option who will potentially experience losses as the price of the contract item rises, since they are obligated to buy it at the strike price.

A Rising Price for the Contract Item Will Lead to Rising