A short put is an options position created by selling, or writing, a put option. The seller takes an upfront premium and, in return, accepts the obligation to buy the underlying asset at the strike price if the buyer exercises.
A short put is used when you expect the underlying to stay above the strike or rise. If the price is above the strike at expiry, the put expires worthless and you keep the full premium. If the price falls below the strike, you can be assigned and must buy the asset at the strike even though the market price is lower, and the loss grows the further the price falls.
A short put is the opposite side of a long put. The long-put buyer pays the premium for the right to sell at the strike and profits when the price falls; the short-put seller receives that premium and is exposed when the price falls. A short put expresses a neutral-to-bullish view, while a long put expresses a bearish one. The seller's maximum gain is the premium, but the loss can be large if the asset drops toward zero.
You sell a put option on a stock with a USD 50 strike and receive a USD 2 premium per share.
If the stock sits above USD 50 at expiry, the put expires worthless and you keep the USD 2 premium.
If the stock falls to USD 44, you can be assigned and must buy at USD 50. Your net loss per share is:
USD 50 - USD 44 - USD 2 = USD 4