This is also known as writing a put. The maximum profit in this situation is the amount of the premium. When selling puts, an investor is taking on a significant amount of risk, especially if he does not have the money to purchase the security. Intrinsic and Time Value Options have both intrinsic value and time value. Intrinsic value represents the actual difference between the option's strike price and the market price of the underlying security.
Options also have time value.
An option that has a longer period of time until expiration will have more time value than one with a shorter time until expiration. Time value also depends on the volatility of the underlying security and investors' expectations of future price movements. Leverage Options and futures are known as leveraged investments. This basically means that the effect of price changes in the underlying security is magnified.