Options Strategy Guide
Married Puts
Buy a stock and buy insurance at the same time.
Beginner
Bullish with downside protection
Limited downside, unlimited upside minus premium cost
The Simple Version
Plain English — no jargon
You want to buy a stock, but you're nervous it might crash. So on the same day you buy the stock, you also buy an insurance policy on it. If the stock falls below your insurance price, your policy pays out. If the stock rises, you keep all the gains minus what you paid for the insurance. Sleep-well-at-night investing.
How It Works — Step by Step
- 1 Buy 100 shares of a stock you are bullish on
- 2 Simultaneously buy a put option on those same shares
- 3 The put acts as a floor — you can always sell shares at the strike price
- 4 If stock rises — you profit from the shares, put expires worthless (cost of insurance)
- 5 If stock crashes — put gains value, protecting you below the strike
Real Example
NVDA
Illustrative example — not a recommendation
Stock Price
$900.0
Strike Price
$850.0
Premium Collected
$12.0/share
Days to Expiration
60d
Max Profit
$999999
Breakeven
$912.0
Annualized Return
0%
When to Use It — and When Not To
✓ Use when
- You are bullish but want protection against a large drop
- Buying a large, concentrated stock position
- Market conditions are uncertain but you don't want to miss upside
- The protection cost is acceptable relative to your position size
✗ Avoid when
- Puts are very expensive — the insurance cost is too high
- You are not actually bullish on the stock
- You have a short time horizon and puts are short-dated (theta risk)
Greeks & Mechanics (for the experienced trader)
Delta
High positive (owning shares) minus small negative (from put). Net bullish.
Theta
Negative on the put — insurance costs money every day.
Vega
Positive — if things go wrong and IV spikes, your put increases in value.
Gamma
Positive on the put — as stock falls, put delta increases and protects more.
Key Risks
- Premium paid for the put reduces overall return on the stock position
- If stock stays flat — you lose the put premium with no compensation
- Protection expires — you must renew if you want continuous coverage
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