Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.
Table of Contents
A married put is an options trading strategy wherein an investor holding an asset purchases a put option to help protect against a potential drop in the asset’s price. For this reason, it’s also called a protective put.
This options strategy may help reduce exposure to sharp declines in the underlying asset price. You can calculate your maximum profit, maximum loss, and breakeven with a married put strategy.
What Is a Married Put?
A married put is an options strategy in which you hold or buy shares of an asset and purchase a put option (typically one that’s at-the-money) to help limit losses from a potential decline in the asset price.
You might execute a married put strategy when you are concerned about a potentially significant downward move in the asset price over the short run, but you want to own the asset for a longer timeframe.
Recommended: How to Trade Options
How Does a Married Put Work?
A married put may help reduce exposure to a decrease in the price of an asset. With a married put, you are still exposed to a loss, but losses are limited based on the strike price and the premium paid.
At the same time, a married put allows you to participate in upside in the underlying asset since the most you can lose with the put option is the premium paid on the option, while your long asset position has unlimited upside.
At-the-money put options can be expensive insurance. The premium you pay for the downside protection can make the strategy cost-prohibitive. Put option pricing depends on many variables, such as underlying price, time to expiration, interest rates, dividends, and implied volatility. The sensitivities to these factors are known as the options Greeks. A married put options strategy may work well during periods of lower implied volatility.
One of the main advantages of a married put options strategy is that you retain unlimited upside potential since you are long the asset and the most you can lose on the put option is the premium paid on that option.
Maximum profit = unlimited
Breakeven
Broadly, a married put’s breakeven point is the adjusted cost basis per share plus the premium paid to acquire the put option. The asset must rise by more than the amount of the premium for the strategy to exhibit gains.
Breakeven = Cost basis of the asset + premium paid per share
Recommended: Call vs. Put Options: The Differences
Maximum Loss
This is a key feature of the married put strategy. The maximum loss is the cost of the asset minus the put option’s strike price, plus the premium paid. The most you can lose with a married put is limited.
Maximum loss = cost basis of the underlying asset – strike + premium paid per share
Finally, user-friendly options trading is here.*
Trade options with SoFi Invest on an easy-to-use, intuitively designed online platform.
*Check out the OCC Options Disclosure Document.
Married Put Example
It is helpful to run through a married put example to show the benefits and downsides of this options strategy. This can help when comparing it against other options strategies.
Let’s say you want to own shares of a stock currently priced at $100. You buy 100 shares for a total of $10,000 and an at-the-money put option contract (with a strike of $100) for $5. Each option contract covers 100 shares, so the total premium is $500.
Your breakeven is $105. That is the per-share cost of the stock plus the premium paid. If the stock is unchanged at the expiration of the options contract, you would have a loss of $5 on the strategy. (Note that this doesn’t take transaction costs into account.)
Your maximum profit is unlimited since the stock has no upside cap. If the stock rallies to $120 by expiration, you would have a $15 gain. While the maximum profit is unlimited, it will be lower than if you’d purchased only the shares due to the cost of the put.
Your maximum loss is $5 per share, the put option premium, when the strike price equals the purchase price. In this example, your maximum loss occurs at or below the strike price of $100. You can close the trade by selling the stock and selling-to-close the option. Alternatively, you can sell-to-close the put or let it expire (if out-of-the-money) and continue to hold the stock.
đź’ˇ Quick Tip: Options can be a cost-efficient way to place certain trades, because you typically purchase options contracts, not the underlying security. That said, trading options online can be risky, and best done by those who are not entirely new to investing.
Pros and Cons of Married Puts
| Pros | Cons |
|---|---|
| May reduce downside risk | The put option’s premium might be prohibitively expensive |
| May offer upside participation | Transaction costs could be high for the put option, including bid-ask spreads and fees |
| May work well during periods of lower implied volatility when you believe there is a near-term risk of a share price decline | Liquidity on the put option could be weak |
Married Puts vs Covered Call
| Married Puts | Covered Call |
|---|---|
| Purchase a (typically) at-the-money put on an underlying asset you own | Sell a call on an asset you own |
| Long the asset and long a put option | Collect a premium to enhance a portfolio’s yield |
| Exit the trade selling-to-close the put option | Roll out by buying-to-close and then potentially selling-to-open another call. |
Strategies Similar to Married Puts
There are several options trading strategies similar to married puts. Let’s investigate those.
Protective Puts
A married put options strategy is also referred to as a protective put strategy. The difference is that you already own the asset with a protective put trade. With a married put, you simultaneously buy the asset and a put.
Long Calls
A married put behaves similarly to a long call. You own the asset with a married put strategy, but a long call position does not entail owning the underlying shares. Long calls differ from naked calls since you buy-to-open a call option contract in a long call strategy, while you sell-to-open calls without owning the underlying shares in a naked call play.
Call Backspreads
A call backspread is a bullish options strategy wherein you sell lower-strike calls and buy a greater number of higher-strike calls at the same expiration on the same asset. A call backspread offers unlimited upside. You would execute this complex options strategy when you are extremely bullish on a volatile asset. Call backspreads are also known as call ratio backspreads.
The Takeaway
A married put options strategy is when you purchase an at-the-money put option on an underlying asset you already own or are simultaneously purchasing. It is a way to help limit risk when you own shares in a company.
Adding a married put raises the position’s cost basis and breakeven, and the put could expire worthless if the stock price finishes above the strike. This approach may suit buyers who want exposure to a stock with defined downside during a set period, understanding that these outcomes depend on volatility, time to expiration, and transaction costs.
SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.
With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.
Explore SoFi’s user-friendly options trading platform.
FAQ
Is a married put the same as a covered put?
A covered put is the opposite of a married put in that you are short the underlying asset and also short a put option. With a married put, however, you are long the underlying asset and also long a put option.
A married put may be a good strategy if you are seeking a measure of protection on an underlying asset you own. It is a bullish strategy used if you are worried about potential near-term risks in the asset. By owning a protective put, you may help reduce downside risk while still being able to participate in asset price appreciation. You have the right to receive dividends and participate in shareholder votes by owning the stock, too. The downside is that you must pay a premium to own the put option.
What is the difference between puts and calls in options trading?
Puts and calls are two option types. Puts give the holder the right but not the obligation to sell shares of an asset at a specific price and at a specified time. Calls give the holder the right but not the obligation to buy shares of an asset at a specified price and time.
Photo credit: iStock/Renata Angerami
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.
Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOIN-Q325-021