The obligation required of the PUT writer is to purchase the number of shares contracted, of the underlying stock, at the strike price, at any time during the life of the contract. As long as the underlying stock price remains at or above the strike price the option will not be exercised and the underlying stock need not be purchased. The PUT writer wants the underlying stock price to rise. Therefore, the stock does not have to be purchased and the premium can be kept, otherwise the stock is a desirable purchase at this price and will be purchased if it declines (drops under the strike price).

Generally, the stocks selected, for selling PUTs, should be fundamentally sound and poised for growth. Ideally the stock should be about to rise in value based on its chart pattern, fundamentals, analysts recommendations or industry trends. Other than conditions specific to the stock, the market should be in an up trend and conditions favorable for a rising market. This is a bullish strategy.

The PUT writers obligation is the strike price of the stock. It is the price that the stock must be purchased at in case the investors timing judgement is wrong. The strike price obligation is slightly offset by the premium originally received. Upon selling the option, this premium is deposited into the investors account. A writer of PUTs should have the cash equivalent of the strike price in reserve, if it should be needed for the purchase. All of the above discussion is without consideration of margin. Each brokerage firm may have different requirements on the cash needed for security. The use of margin will increases the risk / reward of each trade.

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