Chapter 02 · Section 2.1

Short DM Puts

Lara is short 4 PHLX DM June 45 puts.

Which of the following statements is correct?

b) Lara may be assigned the obligation to sell DM 250,000 at $.45/DM, until the expiration date in March.
No. This is a very common mistake. Remember Lara is short, thus a writer of a put. The put gives the holder the right to sell at $.45/DM. So Lara has an obligation to buy from him if the option is exercised.
c) Lara may be assigned the obligation to buy DM 250,000 at $.45/DM, until the expiration date in March.