Options Strategies
Protective Short Stock
Strategies Short Put + Short Stock (Also referred to as Protective Short Stock)
Component Short stock and sell at-the-money put
Potential Profit
  • When the stock price is below the break-even point
  • Limited to the premium received
Maximum Loss
  • When the stock price is above the break-even point
  • Unlimited, equals to stock price minus break-even point
Time Value Impact Positive
Break-even Strike price plus premium received
Remarks The combined position is a synthetic short call. Compared with short-selling on stock only, loss would be reduced by the amount of premium received when the stock price rises. But profit is limited to premium received.
  Net Position -1 stock at 200 -1 Feb 200 Put

Component Short ABC stock at $200 and sell ABC Feb $200 Put, receive $20
Net Premium Receive $20
Break-even $200+$20=$220
Profit when Stock price is below $220
Potential Profit $20
Potential Loss Stock price - $220
Time Value Impact Positive