Naked Put

Cash-Secured Put, Uncovered Put-Write

Type of Strategy

trading / investing



implied volatility



XYZ at $45.  Sell a 45-DTE $45 Put for $2.


max loss = $43     ($45-2)     

max profit = $2  

Breakeven = $43   (short strike – credit recvd)


A short put obligates the seller to purchase shares of the underlying at the strike price at any time prior to expiration.


Sell / write a put option with a strike price X for a credit of P.

Soi perspective

Short puts are a great tool for the option investor looking to purchase shares of an equity at an advantaged price.  By selling the short put, a credit is immediately received.  At any time prior to option expiration, the owner of the short put may exercise the right to sell the shares to the option seller at the given strike price.

By selling short puts on stocks an investor looks to purchase, the investor commits to buying the stock at the strike price, generally lower than the current market value.  If the equity price goes up, the investor benefits by the amount of the premium received.  If the equity price drops below the strike price, the investor is obligated to purchase the shares at the agreed upon strike price, which is generally lower than the market price when the investor entered the transaction.

In cash accounts, writing a put requires the option seller to hold, in cash, the amount needed for the equity purchase obligation (at the strike price).  For investors that manage accounts based on notional values, this should not be problematic.  The requirement of cash-security makes the cash-secured put relatively capital inefficient, a difficulty for option traders.  However, there are many variations on the naked put to improve capital efficiency and even to improve breakeven points.  The right strategy, whether a pure naked put or a more complex four-leg spread, often requires the use of short put options. 

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