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PART OF
Options Trading Guide
Married Put
REVIEWED BY GORDON SCOTT, CMT | Updated Sep 10, 2019
TABLE OF CONTENTS
What Is a Married Put?
How a Married Put Works
Married Put Example
When to Use a Married Put
EXPAND +
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Options Trading Guide
The benefit is that the investor can lose a small but limited amount of money on the stock in
the worst scenario, yet still participates in any gains from price appreciation. The downside is
that the put option costs a premium and it is usually significant.
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Options Trading Guide
KEY TAKEAWAYS
This option strategy protects an investor from drastic drops in the price of the
underlying stock.
The cost of the option can make this strategy prohibitive.
Put options vary in price depending on the volatility of the underlying stock.
The strategy might work well for low-volatility stocks where investors are worried
about a surprise announcement that would drastically change the price.
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Married Put
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Both a married put and a long call have the same unlimited profit potential, as there is no
ceiling on the price appreciation of the underlying stock. However, profit is always lower
than itPART
would
OF be for just owning the stock, decreased by the cost or premium of the put
optionOptions Trading
purchased. Guide
Reaching breakeven for the strategy occurs when the underlying stock
rises by the amount of the options premium paid. Anything above that amount is profit.
The benefit of a married put is that there is now a floor under the stock limiting downside
risk. The floor is the difference between the price of the underlying stock, at the time of the
purchase of the married put, and the strike price of the put. Put another way, at the time of
the purchase of the option, if the underlying stock traded exactly at the strike price, the loss
for the strategy is capped at exactly the price paid for the option.
A married put is also considered a synthetic long call, since it has the same profit profile. The
strategy has a similarity to buying a regular call option (without the underlying stock)
because the same dynamic is true for both: limited loss, unlimited potential for profit. The
difference between these strategies is simply how much less capital is required in simply
buying a long call.
Newer investors benefit from knowing that their losses in the stock are limited. This can give
them confidence as they learn more about different investing strategies. Of course, this
protection comes at a cost, which includes the price of the option, commissions, and
possibly other fees.
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Related Terms
PART OF
Synthetic Call
Options Definition
Trading Guide
A synthetic call is an options strategy where an investor, holding a long position, purchases a put on
the same stock to mimic a call option. more
Collar Definition
A collar, commonly known as a hedge wrapper, is an options strategy implemented to protect against
large losses, but it also limits large gains. more
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