Covered put
Short 100 shares and sell a put against them; profit is capped at the strike.
Bearish2 legsCredit
Illustrative: underlying at 100, strikes every 2.5, 45 days to expiry, implied volatility 25%, model prices. One lot = 100 shares.
Key figures
| Opens for | a credit of $10,214 |
|---|---|
| Max profit | +$464 |
| Max loss | Open-ended as the price rises |
| Break-even | 102.14 |
| Position delta today | −65 shares |
| Outlook | Bearish |
The legs
| Action | Quantity | Option | Model price |
|---|---|---|---|
| Sell short | 100 shares | Shares | 100.00 |
| Sell | 1 | 97.5 put, 45 days | 2.14 |
How it works
Short 100 shares and sell a put against them; profit is capped at the strike. Single options are the building blocks: the right to buy (a call) or to sell (a put) 100 shares at a fixed price, the strike, until expiry. Combined with shares, they add income or protection to a holding.
When it fits
It suits a view that the underlying stays down or falls before expiry.
What can go wrong
The loss is open-ended if the price rises sharply, so position size and a plan for closing early matter. Short options can be assigned early, and a sharp fall with implied volatility rising can hurt more than the expiry line suggests, which is what the crash band shows.
Building it in Trident
In the Strategy Lab, choose covered put and the days to expiry. Trident applies these strike rules to your live chain, prices each leg and draws the trade on the risk graph, where you can drag the days to expiry, change implied volatility or switch on the crash band. When it looks right, send it to order management; nothing reaches your broker until you send it.
Frequently asked questions
What is a covered put?
Short 100 shares and sell a put against them; profit is capped at the strike.
What is the maximum loss on a covered put?
It is open-ended if the price rises sharply.
Where does a covered put break even?
With the underlying at 100 in this illustrative example, the break-even at expiry is 102.14.
Can I build a covered put in Trident?
Yes. Pick it in the Strategy Lab and Trident chooses the strikes from your live chain, prices the legs and draws it on the risk graph.
Illustrative example with model prices, not a recommendation. Options carry risk of loss. See the risk disclosure.