Married Put

Married Put: Definition and Overview

A married put (also called a protective put) is an options strategy in which an investor buys a put option on a stock at the same time they purchase (or while they hold) a long position in that same stock. The put provides downside protection—like insurance—while the investor retains the upside potential of stock ownership.

Key points
* Protects against a sharp decline in the stock’s price.
* The investor keeps benefits of stock ownership (dividends, voting rights).
* The protection costs a premium, which reduces net returns.
* The position is synthetically equivalent to a long call (put-call parity).

How a Married Put Works

Structure
* Long 100 shares of a stock.
* Long one put option on that stock (typically one put per 100 shares) with a chosen strike price and expiration.

Mechanics and payoff
* If the stock rises, the put expires worthless; profit equals stock appreciation minus the put premium.
* If the stock falls below the put’s strike, losses on the stock are limited because the put allows you to sell at the strike price.
* Maximum loss per share = (purchase price + premium) − strike price.
* Breakeven at expiration = purchase price + premium. Any stock price above that is profit.

Why use it
* Acts as downside insurance for near-term uncertainty while preserving upside.
* Useful around known events (earnings, regulatory decisions) or for investors who want limited loss exposure.

Example

Buy 100 shares of XYZ at $20.
Buy one XYZ $17.50 put for $0.50 (premium = $0.50 × 100 = $50).

Costs and breakeven
* Total cost per share = $20 + $0.50 = $20.50.
* Breakeven price at expiration = $20.50 per share.

If the stock falls to $15:
* You can exercise the put and sell at $17.50, so proceeds = $17.50 per share.
* Net loss per share = $20.50 − $17.50 = $3.00 (or $300 total). This is the capped loss.

If the stock rises above $20.50:
* You realize gains above the breakeven, reduced by the premium paid.

When to Use a Married Put

Appropriate when:
* You are bullish on a stock long-term but want protection against near-term declines.
* You expect a short-term risk event that could cause significant downside.
* You prefer preserving capital over minimizing option cost.

Less appropriate when:
* You are a long-term investor indifferent to short-term volatility and unwilling to pay recurring premiums.
* Option premiums are prohibitively high (e.g., for highly volatile stocks), making the hedge expensive.

Pros and Cons

Pros
* Limits downside risk to a known, capped amount.
* Preserves upside potential of the stock.
* Retains stockholder rights (dividends, voting).

Cons
* Premium paid reduces net returns and may make frequent use costly.
* If the put expires worthless, the premium is a sunk cost.
* Transaction costs and spreads can add to expenses.

Who Uses Married Puts

• Traders and investors seeking short-term protection while remaining long a stock.
• Investors who want a predictable worst-case loss.
• Not commonly used by long-term investors who tolerate short-term price swings and prefer a lower-cost approach.

Conclusion

A married put is an effective capital-preservation tool that combines stock ownership with a put option to limit downside while keeping upside exposure. It is best used selectively—when short-term risks justify the premium cost—rather than as a routine insurance strategy for long-term holdings.