Short Put (Naked Put) Calculator

Single-Leg OptionsbullishUndefined Risk

Sell a put option to collect premium with large downside risk.

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What Is a Short Put (Naked Put)?

A short put, also called a naked put, means selling a put option without holding cash or a short stock position to cover it. You collect the premium up front and accept the obligation to buy 100 shares at the strike if the buyer exercises. The premium is the maximum profit, and the trade is opened for a net credit.

The trade profits when the stock stays above the strike through expiration, letting the put expire worthless. Time decay works in your favor daily, and falling implied volatility lets you buy the put back cheaper. The bias is bullish to neutral: the stock can fall all the way to the strike and you still keep the entire credit.

The payoff diagram is a flat line at the credit for every price at or above the strike, then a 45 degree slope downward as the stock falls below it. The loss is large but finite, capped at the strike minus the credit if the stock goes to zero. That is the same downside as owning the stock from the strike price, minus the premium.

Setup

SELL1x OTM1 PUT

Max Profit

Premium received

Max Loss

Strike price - premium (if stock goes to $0)

Breakeven

Strike price - premium received

Short Put (Naked Put) Example

XYZ trades at $100 with 45 days to expiration. You sell the $95 put, about 5 percent out of the money, for $2.20 per share. The net credit is $220 for one contract, and that is the maximum profit. The breakeven at expiration is the $95 strike minus the $2.20 credit, or $92.80.

Stock at expiration	Result
$100 (or anything at or above $95)	The put expires worthless. You keep the full $220 credit, the maximum profit.
$92.80	Breakeven. The put is $2.20 in the money, exactly offsetting the credit. P&L is $0.
$88	The put is $7.00 in the money and costs $700 to buy back or settle. Minus the $220 credit, the loss is $480.
$75	The put is $20.00 in the money and worth $2,000. Minus the $220 credit, the loss is $1,780, more than eight times the premium collected.

Maximum profit is the $220 credit if XYZ finishes at or above $95. Breakeven is $92.80. Maximum loss is $9,280 if the stock goes to zero, calculated as the $95 strike minus $2.20, times 100.

When to Use a Short Put (Naked Put)

You are neutral to bullish and expect the stock to hold above a support level through expiration.
You would be happy to own the stock at the strike price, so assignment is an acceptable outcome rather than a failure.
Implied volatility is elevated relative to its recent history, so puts are expensive and likely to deflate as the market calms.
There is no earnings report or other known downside catalyst inside the expiration window.
Typical entries use 30 to 45 days to expiration and a strike around the 15 to 30 delta, giving roughly a 70 to 85 percent probability of expiring out of the money.

Risks to Understand

A sharp drop or overnight gap can take the stock far below the strike before you can react.
The reward-to-risk ratio is skewed. In the example a $25 decline costs $1,780 against a $220 credit, so the strategy relies on a high win rate.
Rising implied volatility during a sell-off inflates the put's value beyond its intrinsic value, causing a larger mark-to-market loss and a bigger margin requirement at the same time.
Naked puts on margin can create leverage well beyond the account's cash. Several positions moving against you at once can trigger a margin call and forced liquidation.
Early assignment is possible when the put is deep in the money, especially near ex-dividend dates, leaving you long shares you must fund immediately.

Managing the Trade

Take profit at 50 to 75 percent of the credit rather than holding to expiration. The last portion of premium carries the most gamma risk for the least reward.
If the stock falls toward the strike, roll the put down and out to a lower strike and later expiration, ideally for a net credit, to lower the breakeven and buy time.
Set a loss limit at two to three times the credit and close if it is hit.
Buy a further out-of-the-money put to convert the position into a bull put spread when you want to cap the downside or reduce margin.
Keep enough buying power to take assignment on every short put in the account. If you cannot afford the shares, the position is oversized.

Short Put (Naked Put) FAQs

How do you calculate max loss on a short put?: Maximum loss equals the strike price minus the credit received, multiplied by 100, and occurs if the stock goes to zero. Selling a $95 put for $2.20 has a maximum loss of ($95 minus $2.20) times 100, or $9,280 per contract.
What is the breakeven on a short put?: Breakeven is the strike price minus the premium received. A $95 put sold for $2.20 breaks even at $92.80 at expiration. Above that price the trade is profitable, and at or above the strike you keep the full credit.
Is selling a naked put risky?: The loss is large but defined: it is the same downside as owning 100 shares from the strike, less the premium. The main danger is leverage, since brokers require only a fraction of the strike value as margin, so traders can sell more puts than they could afford to be assigned on. Sized so that assignment on every contract is affordable, a short put is no riskier than buying the stock.
What is the difference between a naked put and a cash-secured put?: The option position is identical. A cash-secured put sets aside the full cash needed to buy the shares at the strike, so assignment is fully funded. A naked put is sold on margin with only a portion of that amount reserved, which increases the return on capital but also the leverage and the risk of a margin call.
What happens if a short put is assigned?: You buy 100 shares per contract at the strike price, regardless of where the stock is trading. Your effective cost basis is the strike minus the premium collected. If you do not have the cash, the shares are bought on margin and you may need to deposit funds or sell them. Many traders then sell covered calls against the shares to keep collecting premium.
Can you sell puts for income every month?: Yes, selling 30 to 45 day puts and repeating is a common income approach, often called the wheel when combined with covered calls after assignment. The income is steady in calm markets, but a single sharp decline can give back many months of premium.

Related Strategies

Cash-Secured Put Bull Put Spread Short Call (Naked Call)

What Is a Short Put (Naked Put)?

Short Put (Naked Put) Example

Stock at expiration	Result
$100 (or anything at or above $95)	The put expires worthless. You keep the full $220 credit, the maximum profit.
$92.80	Breakeven. The put is $2.20 in the money, exactly offsetting the credit. P&L is $0.
$88	The put is $7.00 in the money and costs $700 to buy back or settle. Minus the $220 credit, the loss is $480.
$75	The put is $20.00 in the money and worth $2,000. Minus the $220 credit, the loss is $1,780, more than eight times the premium collected.

Maximum profit is the $220 credit if XYZ finishes at or above $95. Breakeven is $92.80. Maximum loss is $9,280 if the stock goes to zero, calculated as the $95 strike minus $2.20, times 100.

When to Use a Short Put (Naked Put)

You are neutral to bullish and expect the stock to hold above a support level through expiration.

You would be happy to own the stock at the strike price, so assignment is an acceptable outcome rather than a failure.

Implied volatility is elevated relative to its recent history, so puts are expensive and likely to deflate as the market calms.

There is no earnings report or other known downside catalyst inside the expiration window.

Typical entries use 30 to 45 days to expiration and a strike around the 15 to 30 delta, giving roughly a 70 to 85 percent probability of expiring out of the money.

Risks to Understand

A sharp drop or overnight gap can take the stock far below the strike before you can react.

The reward-to-risk ratio is skewed. In the example a $25 decline costs $1,780 against a $220 credit, so the strategy relies on a high win rate.

Rising implied volatility during a sell-off inflates the put's value beyond its intrinsic value, causing a larger mark-to-market loss and a bigger margin requirement at the same time.

Naked puts on margin can create leverage well beyond the account's cash. Several positions moving against you at once can trigger a margin call and forced liquidation.

Early assignment is possible when the put is deep in the money, especially near ex-dividend dates, leaving you long shares you must fund immediately.

Managing the Trade

Take profit at 50 to 75 percent of the credit rather than holding to expiration. The last portion of premium carries the most gamma risk for the least reward.

If the stock falls toward the strike, roll the put down and out to a lower strike and later expiration, ideally for a net credit, to lower the breakeven and buy time.

Set a loss limit at two to three times the credit and close if it is hit.

Buy a further out-of-the-money put to convert the position into a bull put spread when you want to cap the downside or reduce margin.

Keep enough buying power to take assignment on every short put in the account. If you cannot afford the shares, the position is oversized.

Short Put (Naked Put) FAQs

How do you calculate max loss on a short put?

Maximum loss equals the strike price minus the credit received, multiplied by 100, and occurs if the stock goes to zero. Selling a $95 put for $2.20 has a maximum loss of ($95 minus $2.20) times 100, or $9,280 per contract.

What is the breakeven on a short put?

Breakeven is the strike price minus the premium received. A $95 put sold for $2.20 breaks even at $92.80 at expiration. Above that price the trade is profitable, and at or above the strike you keep the full credit.

Is selling a naked put risky?

The loss is large but defined: it is the same downside as owning 100 shares from the strike, less the premium. The main danger is leverage, since brokers require only a fraction of the strike value as margin, so traders can sell more puts than they could afford to be assigned on. Sized so that assignment on every contract is affordable, a short put is no riskier than buying the stock.

What is the difference between a naked put and a cash-secured put?

The option position is identical. A cash-secured put sets aside the full cash needed to buy the shares at the strike, so assignment is fully funded. A naked put is sold on margin with only a portion of that amount reserved, which increases the return on capital but also the leverage and the risk of a margin call.

What happens if a short put is assigned?

You buy 100 shares per contract at the strike price, regardless of where the stock is trading. Your effective cost basis is the strike minus the premium collected. If you do not have the cash, the shares are bought on margin and you may need to deposit funds or sell them. Many traders then sell covered calls against the shares to keep collecting premium.

Can you sell puts for income every month?

Yes, selling 30 to 45 day puts and repeating is a common income approach, often called the wheel when combined with covered calls after assignment. The income is steady in calm markets, but a single sharp decline can give back many months of premium.