well the idea is, the party which writes ( i.e. sells ) the put...

well the idea is, the party which writes ( i.e. sells ) the put option to someone, they also sell the share short.

So if the share goes down, the party which bought the put option will exercise it, the issuer of the option loses money, but they make an equal profit from the short sale which they did.


Writing put options is currently one of the legal excuses for doing a short sale, by approved organistions.

I am not clear on what OTHER legal excuses there are.