Covered Put
Options strategy · Level 2 · Long options & hedges
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The mirror of a covered call: you are short 100 shares and sell a put below. The put premium is income; if the stock falls through the strike you are assigned shares, which closes your short.
Where Tradecraft teaches it
Level 2 · Long options & hedges, in the lesson “Hedging stock you own or are short”: Protective puts, protective calls and covered puts: bolting an option onto a stock position.
Related terms
- Protective CallShort 100 shares and buy a call as insurance.
- Short CollarThe collar for a short seller: short stock, buy a call above for protection, sell a put below to pay for it.
- Borrow feeThe annualized fee a short seller pays to borrow shares (and a lender earns); large on hard-to-borrow names.
- Cost of protectionThe premium paid for a hedge, often quoted as a % of the position per year; a certain drag on returns in exchange for a capped loss.
- DeductibleIn the insurance view of a protective put, the loss you absorb before protection starts: the distance from the current price down to the put strike.
- FloorThe lowest effective sale price a hedged holder can get, set by the strike of the put they own (before premium).