Put guarantee letter

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Put guarantee letter

A bank's letter certifying that the person writing a put option has sufficient funds in an account to cover the exercise price if required.

Put Guarantee Letter

A letter issued by a bank stating that the writer of a put option has enough money in a bank account to pay the exercise price should the holder of the put exercise the option. A put option allows the holder to sell a security at a given strike price at his/her discretion. A put guarantee letter reduces the risk to the holder by guaranteeing that the option will be covered if necessary.