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+250 Part Ill: Put Option Strategies 
+Example: XYZ is selling for $25 per share and will pay $1 in dividends over the next 
+6 months. Then a 6-month put option with strike 25 should automatically be worth 
+at least $1, regardless of any other factor concerning the underlying stock. During the 
+next 6 months, the stock will be reduced in price by the amount of its dividends- $1 
+- and if everything else remained the same, the stock would then be at 24. With the 
+stock at 24, the put would be 1 point in-the-money and would thus be worth at least 
+its intrinsic value of 1 point. Thus, in advance, this large dividend payout of the 
+underlying stock will help to increase the price of the put options on this stock. 
+On the day before a stock goes ex-dividend, the time value premium of an in­
+the-money put should be at least as large as the impending cash dividend payment. 
+That is, if XYZ is 40 and is about to pay a $.50 dividend, an XYZ January 50 put should 
+sell for at least l 0½. This is true because the stock will be reduced in price by the 
+amount of its dividend on the day of the ex-dividend. 
+EXERCISE AND ASSIGNMENT 
+When the holder of a put option exercises his option, he sells stock at the striking 
+price. He may exercise this right at any time during the life of the put option. When 
+this happens, the writer of a put option with the same terms is assigned an obligation 
+to buy stock at the striking price. It is important to notice the difference between 
+puts and calls in this case. The call holder exercises to buy stock and the call writer is 
+obligated to sell stock. The reverse is true for the put holder and writer. 
+The methods of assignment via the OCC and the brokerage firm are the same 
+for puts and calls; any fair method of random or first-in/first-out assignment is 
+allowed. Stock commissions are charged on both the purchase and sale of the stock 
+via the assignment and exercise. 
+When the holder of a put option exercises his right to sell stock, he may be sell­
+ing stock that he currently holds in his portfolio. Second, he may simultaneously go 
+into the open market and buy stock for sale via the put exercise. Finally, he may want 
+to sell the stock in his short stock account; that is, he may short the underlying stock 
+by exercising his put option. He would have to be able to borrow stock and supply 
+the margin collateral for a short sale of stock if he chose this third course of action. 
+The writer of the put option also has several choices in how he wants to handle 
+the stock purchase that he is required to make. The put writer who is assigned must 
+receive stock. (The call writer who is assigned delivers stock.) The put writer may cur­
+rently be short the underlying stock, in which case he will merely use the receipt of 
+stock from the assignment to cover his short sale. He may also decide to immediate-