DeCalls Whitepaper

Selling a Put Option (Short SOL-Covered Put)

Why a trader might choose to sell a Put option
Just as the sellers of Call options must provide collateral to sell a “covered call,” so too the sellers of Put options must provide collateral.
Since the sellers of Put options are agreeing to buy the NFT if it falls below a certain price, they must collateralize the amount of SOL equal to the strike price (this is known as selling a “cash-covered put”).
This strategy is suitable for someone who wouldn’t mind owning the NFT because they are long-term bullish on the project. If the floor price stays above the strike price of the Put option, they can keep the profit from the premium they received as the option expires worthless. If the floor price falls below the strike price, they will end up acquiring the NFT.
A side note for the particularly astute: if you ever utilized P2P Loans, you may recall that oftentimes when the NFT’s floor price fell below the loan amount, the NFT owners would intentionally default and effectively sell the NFT to you for the value of the loan. If you ever thought this was as if the lender were selling a cash-covered put, you are correct. The only difference is that with the loan, the lender is essentially locked in to the deal for the entire duration of the loan with no ability to exit. However, if the seller of a Put option changes his mind and wants to get his collateral back, he can buy back that same Put option to exit his position (it has to be the same strike price and same expiration).