when the price of the stock falls below the strike price before or by the expiration date the buyer of the options vehicle can demand the seller take delivery of shares of the underlying stock the options seller will then have to go to the open market and sell those shares at the market price loss even though the options writer had to pay the options strike price for example imagine the strike price is 60 and the open market price for the stock is 55 at the time the options contract is exercised in this case the options seller will incur a loss of 5 per share of stock 
the premium collected does somewhat offset the loss on the stock but the potential for loss can still be substantial the breakeven point for a naked put option is the strike price minus the premium giving the options seller a little leeway 