Typically, the other party is required to hold a margin account. If you sell a put for 100 units at $50, and the spot (current) price is $45, you're ($50-$45)*1

Typically, the other party is required to hold a margin account. If you sell a put for 100 units at $50, and the spot (current) price is $45, you're ($50-$45)*100 = $500 in the red. Your broker requires you in that situation to hold at least $500 (usually more) in cash (or cash-equivalent securities) in your margin account. If the price dips even more, your broker will ask you to add more money to your margin account quickly, or they will liquidate your position. That means that when you don't keep enough cash to cover the loss, your broker will use the cash in your account to buy a put at $50, effectively zeroing out your position. You lose the money you had in margin account, but you are no longer losing (or gaining) money on market movements.