Covered Put (Married Put)
A protective put (married put) is a hedge: hold the underlying and buy a put to cap downside for a period.
What it does
- Limits downside for the hedge period
- Costs premium (insurance cost)
- Keeps upside open unlike covered calls
Tip
Choose hedge expiry and strike based on the drawdown you want to protect against and the premium you can afford.
Practical deep‑dive
Info
Profile
Best suited for neutral or income/hedging objectives depending on structure.
Strategy snapshot (quick)
| Field | Value |
|---|---|
| Style | hedge |
| Cost type | Often used as a hedge/insurance (premium is the “insurance cost”). |
| Best when | You want downside protection while staying invested (risk management). |
| Watch out | Premium cost can add up; choose strikes/expiry based on protection needed. |
Greeks to watch
Focus on these exposures first
| Greek | Why it matters |
|---|---|
| Delta | How much protection you get for a move |
| Theta | Insurance cost over time |
| Vega | Hedges often get pricier when fear rises |
Professional options traders focus on “structure first”: define risk, choose strikes/liquidity, and write down exit rules before entry. Most losses come from oversized positions and holding short-dated options without a plan.
Execution checklist
Use this before placing the trade
| Check | Why it matters | Quick test |
|---|---|---|
| Liquidity | Spreads can eat edge | Tight bid‑ask + decent volume/OI |
| Risk defined | Prevents blow-ups | Max loss is known and acceptable |
| Time horizon | Avoid time mismatch | Expiry matches your view timeframe |
| Volatility regime | Premium cost changes outcomes | IV not extreme vs recent range |
| Exit plan | Stops emotional decisions | Target/stop/time exit written down |
Mistakes to avoid
- Trading illiquid strikes (wide spreads) because premium looks “cheap”.
- Using market orders during fast moves and getting poor fills.
- Adding to losing positions without a predefined rule.
- Ignoring event risk (results, policy events) near expiry.
- Overusing weekly expiries before mastering risk control.
Summary (takeaways)
- Prefer defined-risk structures while learning.
- Liquidity and execution quality matter as much as strategy selection.
- Consistency comes from process, not predictions.