The Married Put is an option strategy in which the options trader buys an at-the-money put option while simultaneously buying an equivalent number of shares of the underlying stock.
Hold 100 shares; Buy 1 put.
A married put strategy is usually employed when the options trader is bullish on a stock, wants the benefits of stock ownership (dividends, voting rights, etc.), but wary of uncertainties in the near term.
Profit potential
Profit can increase without a finite upper bound as the underlying rises.
Unlimited as the stock price rises.
Loss potential
Loss is finite under the stated assumptions, but can be substantial. A stock or nonnegative index cannot fall below zero.
Stock purchase price plus the put premium paid, minus the put strike price.
Breakeven points
Stock purchase price plus the put premium paid, provided that price is at or above the put strike.
Example
An options trader is very bullish on XYZ stock but worried about near term uncertainties. They establishes a married put position by purchasing shares of XYZ stock trading at $52 in June while simultaneously buying SEP 50 put options trading at $2 to protect their share purchase.
Maximum loss occurs when the stock price dive to $50 or below at expiration. With the SEP 50 puts in place, even if the stock price dive to $30, they will still be able to sell their holdings for $50. Therefore, their maximum loss is limited $2 in paper loss + $2 in premium paid for the options = $4.
On the upside, there is no limit to the profits should the stock price head north. Suppose the stock price goes up to $70, their profit will be $18 in paper gain less $2 paid for the put protection = $16.
However, if the stock price remain unchanged at expiration, they will still lose $2 in premium paid for the put insurance.
Commissions
These examples exclude commissions and fees. Include all transaction costs when evaluating the profit or loss of a position.
Similar strategies
Amounts are per share before fees. Multiply by the shares covered by the position; standard equity options usually cover 100 shares per contract. If a maximum profit or loss calculation gives a negative amount, use zero. These figures assume matching contracts held to expiration and do not include financing or early assignment.
Financial mechanics reviewed:
Sources: OIC strategy reference; OIC assignment guidance. Formulas use the stated payoff assumptions; examples are illustrative, not market quotes. Editorial standards and corrections.