Option Education

[leemalone2k3]

I answered it on the other board, but will post it here too.
Very good question, btw.

If CME stays above 155 on expiry you will collect your premium. If it drops below or gaps below, you may be put the stock which means you will have to buy 1000 shares. Your price will be at 151.00/share since you brought in 4.00. If it starts to drop you can buy the contracts back as long as it is above 155. Selling puts is a great way to bring in premium and let Theta decay that premium, or buy stock at a discount. Be careful though, if you are put the stock, you will need enough money to buy that much stock.
If you are put the stock, your breakeven price is 151.00