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.