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OptionsMath

Covered Put Calculator

Covered put profit or loss equals short stock basis minus stock price plus premium minus short put obligation, times 100 shares times contracts.

Expiration scenarios

Solution

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Covered Put Formula

A covered put combines short stock with a short put. Upside risk remains unlimited from the short stock.

Worked Examples

Load these examples to compare common covered put payoff outcomes.

BEARISH INCOME

What if stock falls through the put strike?

The short stock gains, but the short put gives back gains below its strike.

  • Short stock gains as price falls.
  • The short put is assigned below strike.
  • Profit is capped below the put strike.

Result: the covered put reaches its capped downside profit.

Borrow costs and hard-to-borrow risk are not included.

How It Works

A covered put combines short stock with a short put. It is often described as the bearish counterpart to a covered call, but the short stock creates unlimited upside risk.

Example Problem

Short stock at $100 and sell a $90 put for $3.

  1. Calculate short stock profit or loss.
  2. Add put premium income.
  3. Subtract short put assignment loss if stock is below the strike.
  4. Find break-even by adding premium to short stock basis.

The position can be assigned on the short put and has unlimited risk if the stock rallies.

Key Concepts

Premium raises the break-even for short stock, while the short put caps profit below the put strike.

Applications

  • Modeling bearish income trades.
  • Comparing covered puts with covered calls.
  • Estimating assignment outcomes.

Common Mistakes

  • Forgetting short stock upside risk.
  • Assuming the short put protects the position.
  • Ignoring borrow costs and assignment.

Frequently Asked Questions

What does the Covered Put Calculator calculate?

It calculates expiration profit or loss, break-even levels, maximum profit or loss where they are defined, and payoff chart data from manually entered prices and premiums.

Does this calculator need live option quotes?

No. Enter the stock price, strikes, premiums, and contracts yourself. The calculator models expiration payoff from those inputs.

Does this model early assignment or changing implied volatility?

No. It is an expiration payoff calculator. It does not model commissions, fees, early assignment, exercise decisions, taxes, or mark-to-market pricing before expiration.

Why can payoff before expiration differ from this result?

Before expiration, option prices still include time value and implied volatility. This calculator focuses on intrinsic value at expiration.

Reference: Options Industry Council strategy education and standard expiration payoff definitions.

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