Short Put Strategy
BullishAdvancedHigh Risk
Sell put options to collect premium with bullish outlook. Significant risk if stock declines.
Short Put Calculator
Premium Income
$300.00
Max Profit
$300.00
Max Loss
$14200.00
Breakeven
$142.00
Max Profit Return
2.07%
Downside Cushion
5.33%
Profit/Loss at Expiration
Position Summary
• Short 1 put at $145 strike
• Premium received: $3.00
• Maximum profit if stock stays above $145
• May be assigned to buy 100 shares at $145 if stock falls below strike
Strategy Overview
Type:Single Option
Outlook:Neutral to Bullish
Risk/Reward:Limited Reward, Significant Risk
Complexity:Advanced
Description
A Short Put involves selling a put option without cash to cover assignment. It profits when the stock stays above the strike price, with the maximum gain being the premium received.
Setup
Sell Put Option
Strikes: At or out of the money
Expiration: Typically 30-45 days
When to Use
- •You expect the stock to rise or stay flat
- •Implied volatility is high
- •You want to collect premium income
- •You understand and can manage significant risk
Advantages
- +Immediate premium income
- +Profits from time decay
- +Benefits from volatility decrease
- +Can be assigned shares at lower price
Disadvantages
- -Significant loss potential if stock falls
- -Requires margin account
- -Subject to early assignment
- -High risk strategy
How It Works
1
Sell Put: Receive premium for selling put option.
2
Monitor Position: Watch stock price relative to strike.
3
Manage Risk: Close or roll if stock falls significantly.
Key Metrics
Max Profit:Premium Received
Max Loss:Strike Price - Premium (if stock goes to $0)
Breakeven:Strike Price - Premium
Time Decay:Favorable (Theta positive)
Assignment Risk:High if ITM