Well... no stock has been PUT to me yet from the 447 July 2015 $7.50 PUTS I sold... but I know that on Monday morning there will be 44,700 shares of IPCI in my account (they take out $335,250 of cash out).
I don't know how it works on the other end - let's assume it's one individual... does he have the stock and it gets pulled away from him??? does he automatically go short??? does he have to buy 44,700 shares??? I really have no idea what happens on the other end.
Anyway... my average sale was $5.60 - so it's like paying $1.90 for the stock. $3.71 - 1.90 = $1.81 x 44,700 = $80,907 profit (all paper profit of course) - nice little bundle... but peanuts compared to what I expect it to make me going forward.
You sold PUT options to someone who has an option to sell you the stock at the strike price. It's an option, they can let it expire without selling you any stock. If the current stock price is lower than the strike price, then the option owner will buy the stock at the lower price and put it to you at the higher strike price. The "nice little bundle" belongs to the owner of the PUT you sold. If the current stock price is higher then the strike price, then the option expires without action and the profit is yours and equals the total sale price of the puts that you sold.
I'm a little confused by the numbers you posted, so please correct me if I misunderstand the details. It sounds to me like you just paid $335,000 for stock worth $166,000.
You sold 447 put options (100 shares/option) for an average sale price of $5.60, so you start out + $2500. If the strike price is $7.50 per share, the holder of the put option would most definitely exercise the option. The holder would buy 44,700 shares on the open market for $166,000 and sell them to you for $7.50 x 44700 = $335,000.
You're not paying $1.90/share as you say. You're paying $7.44/share. Someone is laughing all the way to the bank, but it's not you. Please correct me where I'm wrong. I'm no expert in options. I avoid investment instuments that I do not fully understand.