How do you calculate the max loss on a protective put?

Maximum loss is the stock purchase price minus the put strike plus the premium paid, multiplied by 100. If you bought shares at $100 and a $95 put for $2.00, max loss is $700. That is the most you can lose regardless of how far the stock falls.

Is a protective put worth it?

It depends on how much you would suffer from a large drawdown. The premium typically costs 2 to 5 percent of the position per quarter for a strike 5 to 10 percent out of the money, which is a meaningful drag if held continuously. Most investors use it tactically around specific events rather than permanently.

What is the difference between a protective put and a married put?

They are the same strategy. A married put usually refers to buying the stock and the put at the same time, while a protective put refers to adding a put to shares you already own. The payoff and risk are identical.

What happens to a protective put if the stock goes up?

The put loses value and eventually expires worthless, and you keep the shares and all their gains. Your profit equals the stock gain minus the premium paid. The put simply acted as insurance you did not need to claim.

Should I exercise a protective put or sell it?

Selling the put usually captures any remaining time value in addition to the intrinsic value, so it is often better than exercising before expiration. Exercise if you want to exit the shares at the strike price and the put has no time value left, or if the put is illiquid.

What strike should I buy for a protective put?

A strike 5 to 10 percent below the current price with 60 to 120 days to expiration is common. A higher strike gives more protection but costs more, like a lower insurance deductible. A lower strike is cheaper but leaves you exposed to a larger initial loss.

Protective Put Calculator & strategy guide

Stock + OptionBeginnerBullishDefined risk

Buy a put against long stock to create a floor under the position.

Payoff at expiration

Worked example: XYZ at $100, 60 days to expiration

Profit Loss Breakeven

Max profit: Unlimited; Unlimited from the long stock, reduced by put premium
Max loss: −$700; Stock price − put strike + premium paid
Breakeven: $102; Stock price + premium paid

The trade · net debit $2.00 a share ($200)

Own 100 shares at $100
Buy $95 put · $2.00

Price this protective put on SPY with today's chain — then change the ticker, strikes and expiry.

Open in Build

What is a protective put?

A protective put, also called a married put, combines 100 shares of long stock with one long put on the same underlying. The put gives you the right to sell your shares at the strike price, so no matter how far the stock falls, your loss is capped at the difference between your purchase price and the strike plus the premium paid. It works like an insurance policy on the position.

The cost of that insurance is the put premium, which is lost if the stock rises or stays flat. Above the breakeven, the position behaves like long stock minus the premium. Below the strike, the put gains value dollar for dollar as the stock falls, freezing your loss. Time decay works against you, since the put loses extrinsic value every day the stock stays above the strike.

The payoff diagram looks like long stock with the bottom sliced off. It rises one for one with the share price, shifted down by the premium, and flattens into a floor below the strike. A protective put is a bullish position for investors who want to stay long through uncertainty but cannot tolerate a large drawdown, such as ahead of earnings or during a volatile market.

Setup

Leg	Strike	Expiry
Long 100 shares	—	—
Buy 1 put	1 strike OTM	Near

Protective Put example

You own 100 shares of XYZ bought at $100, and the stock trades at $100 with 60 days to expiration. You buy one $95 put for $2.00, paying $200. The put guarantees you can sell the shares at $95 until expiration, no matter how low the stock goes.

Stock at expiration	Result
$110	The put expires worthless. The shares have gained $1,000, reduced by the $200 premium, for a net profit of $800.
$102	Breakeven. The shares have gained $200, exactly offset by the $200 premium. P&L is $0.
$100 (unchanged)	The put expires worthless and the shares are flat. You lose the $200 premium, the cost of the insurance.
$80	The shares have lost $2,000, but the put is $15 in the money and worth $1,500. Net loss is $500 plus the $200 premium, or $700, the maximum loss.

Maximum loss is $700 (the $5 gap between $100 and the $95 strike plus the $2.00 premium, times 100) no matter how far XYZ falls. Breakeven is $102. Maximum profit is unlimited, since the shares can keep rising, less the $200 premium.

When to use a protective put

You hold shares with a large unrealized gain and want to protect it through a specific risk event such as earnings, a product launch, or a regulatory decision.
You are bullish long term but expect a period of elevated volatility and cannot afford a drawdown beyond a set level.
You want to keep the stock for tax reasons rather than sell and repurchase, but need downside protection in the meantime.
Implied volatility is low relative to its history, making puts inexpensive relative to the protection they provide.
Typical entries use 60 to 120 days to expiration and a strike 5 to 10 percent below the stock price, which balances cost against the size of the deductible.

Risks to understand

The premium is a recurring cost. Rolling protective puts every two to three months can consume several percent of the position value per year, dragging on long-term returns.
If the stock trades flat, the put decays to zero and you lose the entire premium with nothing to show for it.
Buying puts when implied volatility is high, such as right before earnings, means overpaying for protection that may fall in value even if the stock declines modestly.
The protection has a deductible. In the example you still lose $700 before the floor kicks in, and a gap through the strike locks in that full loss.
Protection ends at expiration. If you forget to roll, the shares are unprotected exactly when you may need coverage most.

Managing the trade

If the stock rises well above the purchase price, roll the put up to a higher strike to lock in a higher floor, accepting the extra premium as the cost of protecting the new gains.
If the stock falls through the strike, decide whether to exercise the put and exit the shares or sell the put for its intrinsic value and keep the stock with a lower cost basis.
Close or roll the put a few weeks before expiration rather than letting it expire, so the position is never accidentally unprotected.
Consider converting to a collar by selling an out-of-the-money call, which offsets some or all of the put premium in exchange for capping upside.
Buy protection when volatility is calm rather than after a drop, when put prices have already risen sharply.

Protective Put FAQs

How do you calculate the max loss on a protective put?: Maximum loss is the stock purchase price minus the put strike plus the premium paid, multiplied by 100. If you bought shares at $100 and a $95 put for $2.00, max loss is $700. That is the most you can lose regardless of how far the stock falls.
Is a protective put worth it?: It depends on how much you would suffer from a large drawdown. The premium typically costs 2 to 5 percent of the position per quarter for a strike 5 to 10 percent out of the money, which is a meaningful drag if held continuously. Most investors use it tactically around specific events rather than permanently.
What is the difference between a protective put and a married put?: They are the same strategy. A married put usually refers to buying the stock and the put at the same time, while a protective put refers to adding a put to shares you already own. The payoff and risk are identical.
What happens to a protective put if the stock goes up?: The put loses value and eventually expires worthless, and you keep the shares and all their gains. Your profit equals the stock gain minus the premium paid. The put simply acted as insurance you did not need to claim.
Should I exercise a protective put or sell it?: Selling the put usually captures any remaining time value in addition to the intrinsic value, so it is often better than exercising before expiration. Exercise if you want to exit the shares at the strike price and the put has no time value left, or if the put is illiquid.
What strike should I buy for a protective put?: A strike 5 to 10 percent below the current price with 60 to 120 days to expiration is common. A higher strike gives more protection but costs more, like a lower insurance deductible. A lower strike is cheaper but leaves you exposed to a larger initial loss.