Short Put

The short put option strategy is a bullish options trading strategy with a limited profit potential with substantial theoretical loss if stock goes down to zero value.


-Sell 1 put option

Note: like most options strategies, calls can be purchased in-the-money (ITM), at-the-money (ATM), or out-of-the-money (OTM).

Preference : Sell an 16-20 delta OTM put

Trade Example

-Stock XYZ is trading at $27 a share.
-Sell 26 put for $2.00

Short Put Summary
Break Even Price Strike Price – Premium Received


Limited to initial premium received
Maximum Profit Scenario Stock stays at higher than the strike price


Substantial if stock goes to $0.00
Maximum Loss Scenario Stock tanks to $0.00
Why Trade If you are moderately bullish on a stock you can use this option strategy. This strategy provides some cushion for error
When to Trade Stock Assumption : Bullish

Volatility : When volatility is high, so you gather more premium to open the trade

When to Close When the trade is making 50% of max possible profit
Legs 1 leg
Passage of time Positive.

With passage of time, the value of this option decreases which is positive for your portfolio

Increase in volatility Negative.
With increase in volatility, the value of option increases.
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