Short Put
Components
A short put is simply the sale of a put option.
Risk / Reward
Maximum Loss: Unlimited in a falling market.
Maximum Gain: Limited to the premium received for selling the put option.
Characteristics
When to use: When you are bullish on market direction and bearish on market volatility.
Like the Short Call Option, selling naked puts can be a very risky strategy as your losses are unlimited in a falling market.
Once the underlying stock trades below the strike price price the option becomes out of the money. The option will continue to lose money as the stock continues a downward price movement.
I guess it is not really unlimited as a stock price cannot go below 0.