What is a Short Put?
A Short Put means you sell a put option and immediately collect the premium. You profit if the stock stays above your strike price at expiry — the put expires worthless and you keep everything. If the stock crashes, you face large (though not unlimited) losses. The stock can only fall to zero, so your maximum loss is strike minus premium received.
This strategy is sometimes called "getting paid to buy the dip." You agree to buy the stock at a lower price if asked to — and collect premium for making that commitment. If the stock stays up, you never buy it and keep the premium as pure income.
Warren Buffett famously uses Short Puts on companies he wants to own at lower prices. He either gets paid for the commitment, or he gets the stock at his target price. It's sophisticated, patient value investing — but requires conviction in the underlying stock.
At a Glance
Max Profit
Premium received only
Max Loss
Strike − Premium (stock → 0)
Breakeven
Strike − Premium Received
How to Set It Up
| Action | Type | Strike | Expiry | Qty |
|---|
| Sell | Put (PE) | OTM Strike — below current price | 21–45 DTE | 1 Lot |
Payoff at Expiry
Short Put
📊 Short Put — Payoff Chart + P&L Calculator
Current Price: 22000 · Strike Price Sold: 21500 · Premium Received: 90 · Lot Size: 75 · Price at Exit: 21800
When Should You Use This Strategy?
✓ When to Use / ✕ When to Avoid / ◉ IV / ◷ DTE
4 use items · 3 avoid items
Worked Example
Nifty at ₹22,000. Bullish to neutral. You sell the 21,500 PE for ₹90.
⊞ Trade Table
0 legs · 3 scenarios
Key Points
- Only sell puts on stocks you'd genuinely be happy owning at the strike price. Make sure you mean it.
- Set a stop-loss at 2× the premium received. If the put doubles against you, exit.
- Convert to a Bull Put Spread by buying a lower-strike put to completely define your maximum loss.
- Maintain enough capital to potentially take assignment — don't over-leverage.
#Basic Strategies
Disclaimer
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