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Married put

Buying stock and a protective put at the same time, as one order; the entry version of a protective put and, in the US, a tax-lot distinction.

Economically a married put has the same payoff as a long call at the put's strike: unlimited upside, floored downside, with the put premium as the cost. Buying both legs together is what distinguishes it from a protective-put added to shares you already own.

The reason the distinction survives is tax. In the US, a put bought on the same day as the stock and identified as a hedge can preserve the holding period of the shares, while a put bought later against an appreciated position can suspend it. Confirm the treatment with an accountant rather than a forum post.

Example: XYZ at $50. Buy 100 shares and the 90-day $47.50 put at $1.35 as a package for $51.35 net. Below $47.50 your loss is capped at $3.85 a share. Above, you keep everything past $51.35, which is exactly the payoff of the $47.50 call plus a bond.

Related: protective-put, synthetic-call, collar, left-tail-hedge

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Payoff of a long call at expiryA flat loss equal to the premium below the strike, turning upward at 45 degrees above it.Profit / loss per share08595115125Strike 105Max loss 3 — the premium paidBreakeven 108Profit keeps growingUnderlying price at expiry
Buying a call: payoff at expiry. A 105-strike call bought for 3 loses that whole 3 if the price finishes at or below 105, breaks even at 108, then gains a dollar for every dollar higher. The loss is capped at the premium; the upside is not capped.

Educational only, not advice. Spotted an error? Post in Site Feedback.