Married Put Option Screener

Hi, and welcome to this edition of the Options Learning Center. I'm going to show you how to buy married puts and use Barchart to get the most out of the strategy.

What is a Married Put?

A married put is an options strategy in which an investor buys shares of stock and a put option on the same underlying asset - at the same time. They are often mistakenly called protective puts. While their goals are the same, the key difference is that a married put is done by buying the stock and the put simultaneously. It becomes a protective put if you already own the shares before buying the put.

Key Differences:

• Married Put: Buying Stock And A Put Simultaneously
• Protective Put: Buying a Put on Owned Stock

The strike price and expiration date are set according to the investor's risk tolerance. The goal of a married put is to protect the investor's shares from significant downside risk, as the investor can either exercise the option or sell the put at a profit if the stock drops enough before the option expires. Doing so protects investors from losses should the stock fall below the strike price while maintaining exposure to the upward price movement of the underlying securities.

Married Put Options Strategy

• Stock & Put Purchase: Buys Stock and a Put Option for the Same Asset
• Goal: Protect Against Downside While Maintaining Upside Potential
• Strike Price & Expiration: Based on Risk Tolerance

A married put's maximum profit is theoretically unlimited on the upside. To the downside, it's capped as it'll protect an investor from losses below the strike. Investors can profit with a married put in two ways. First, the stock's price could move significantly above the strike price, resulting in profit by selling the stock. Alternatively, if the stock's trading price instead moves significantly below the strike price before expiration, the investor can exercise the put option or sell it at the market price, limiting their losses rather than resulting in a profit.

• Profit: Sell Stock (Upside) Or Sell Option (Downside)
• Loss: Exercise Option on Expiration For Loss Protection

The maximum loss is your cost base on the underlying security, plus the premium paid for the put option, minus the strike price.

Max Loss: (Cost basis + Premium) - Strike

Trade Examples

Let's use Barchart to find potential married put trades.

Screening The Market For Married Put Trades

To access the Married Put screener, go to Barchart.com, click on the Options tab, and then click on Married Put Screener. This will immediately bring you to the Married Put default Results page with all the potential selections in the market.

The Results page includes relevant trade information, like premium prices, max loss, in-the-money and out-of-the-money probabilities, and more. Each column header can be clicked, allowing you to arrange the results from the highest to lowest of your chosen column header.

Usually, these results are enough for you to start trading, but you may want to change the default filters used by the screener. Barchart allows you to do just that by simply clicking on the Set Filters tab in the top-left corner of the results page.

Once there, you'll be shown the default filters for married put trades. These are already excellent for newbies and intermediate traders, though I like to tweak my trades for more customized results.

Let's focus on the ITM Probability filter.

As the name suggests, ITM Probability is a metric that measures the chance of the underlying asset's price going below your put option's strike price and, therefore, expiring in the money. Since you're buying a married put for protection only, choosing one with a low ITM probability is in your best interest. I'll set the probability to less than 30%, then click on See Results.

And there we have it. Again, all column headers can be clicked to arrange the results from highest to lowest or vice versa. I'll choose the stock with the lowest ITM probability for this instance. We have Walmart at the very top.

Before I dive into the trade and its potential, you can also save your screener to reuse it later. You can also have Barchart email you at a specified time with your trades. Just click Save Screener near the top right, then type in the name of the screener and click on when you want the email to arrive.

Now, back to the trade.

For this example, we'll be using Walmart, which you can buy 100 shares of for $76.64 a share. Then, you can buy a $73-strike put for 42 cents per share, or $42 total per contract. The trade has an 18.27% chance of expiring in the money, and it expires on October 4, 2024, 25 days from the scan date. So, you've bought 25-days of protection for your 100 Walmart shares for $42.

Now, let's break down the married put strategy using this trade.

Break Even Price

First, let's calculate the breakeven price for the trade. Since you paid for the protective put, Walmart needs to trade higher than $77.06 for the trade to break even. To calculate the breakeven price, add the premium paid to the original purchase price.

$76.64 + $0.42 = $77.06

Married Put Profit Condition

Most of the profit from a married put option depends on the stock price's movement, since it's a protection or hedging strategy. And let me tell you, analysts seem to like WMT very much, giving the stock a strong buy rating and a high target price of $90.

Analyst ratings and price targets, like the current strong buy rating for WMT with a $90 price target, can fluctuate, so always check for the most recent data.

By the way, you can access this information on Barchart.com, then search for Walmart's stock profile page and look for Analyst Ratings on the left hand side of the screen.

So, let's say Walmart goes up to $90 per share on October 4. Subtracting the breakeven price of $77.06 from $90, you'd have a profit of $12.94 per share or $1,294 per contract.

$90 - $77.06 = $12.94

After that, you can sell your shares at a profit. Your put option might also have a little value, but, since the stock moved up so much, it might only be worth a few pennies. So, you'll want to consider the trading fees before closing it out. If the trading fees exceed the premium, you can let the option expire worthless.

Married Put Loss Condition

On the other hand, let's say that Walmart goes to $65 per share on September 25. If it was any old stock trade and you wanted to cut your losses, you'd see a $11.64 per share loss or $1,164 total.

$76.64 - $65 = $11.64
$11.64 x 100 = $1,164

However, since you already have a put option with a $73 strike, you can exercise that and sell your WMT shares for $73 each, and protect yourself from any further losses. By exercising the put, you'll reduce your total loss to $406, saving yourself $758 in additional losses compared to not having the protection.

$73 - $77.06 = -$4.06 x 100 = -$406
$1,164 - $406 = $758

That's one way married puts can protect your shares. However, there is a better way, but only if you still have time in the contract.

You can also sell your put option since it would be in the money. A put's premium is made up from its intrinsic value or the actual value. Since we said the stock is now trading at $65, and the strike is $73, the intrinsic value is $8.

But the option will also have extrinsic value, which is decided by several factors like how much time it still has until expiration, volatility, interest rates, and dividends.

Extrinsic Value:

• Time until expiration
• Volatility
• Interest rates
• Dividends

Since you have roughly ten days until expiration, let's say investors may be willing to pay $5 more for your $73-strike put because volatility is high, the remaining time on the option, and WMT's price is still falling, bringing your total premium received to $13 or $1,300 total.

$73 - $65 = $8
$8 + $5 = $13 x 100 = $1,300

So, you can sell your Walmart shares for $65 each and take a $1,164 loss on the shares, and then you sell your option for $1,300. So, instead of losing on the trade, you make $94 per contract.

• WMT Stocks Cost: $76.64
• Put Option Cost: $0.42
• Sold WMT Stocks: $65.00
• Sold Put Option: $13.00
• Math: ($76.64+$0.42)-($65+$13) * 100
• P/L: $94/contract

The lower Walmart's price drops below your strike price, the more value your option has and the lower losses you get should you sell your put. However, remember that long put options lose extrinsic value as they approach expiration due to time decay, so the loss mitigation will vary depending on factors like time remaining and volatility.

Profit/Loss Across Different Price Points

Here are different profit and loss scenarios for different price points to give you a better idea of how this married put trade can turn out, assuming that you opt to exercise at expiration.

As you'll notice, the losses stop at $406, regardless of how much Walmart's price moves down. Meanwhile, you maintain full exposure to any upside potential beyond your breakeven price. That's how a married put allows you unlimited upside potential, while reducing risks to the downside.

Screening For Married Puts For Specific Assets

Barchart also allows you to search for married puts for a specific asset. All you need to do is go to the stock or asset's Price Overview page on Barchart.com. Once there, look for Protection Strategies. Then look for the Married Puts tab. You can click on the dropdown to change the expiration dates or click the screen button to reach the option screener page for a more granular search.

Pros and Cons

The biggest advantage of a married put is its unlimited profit potential as it allows you to fully participate in all the growth of the stock, and the downside protection it gives. Losses are limited to the difference between the breakeven price and the strike price and how much you pay for the long put. They're also flexible, with the strike prices and expiration dates up to your risk tolerance.

Pros:

• Unlimited Profit Potential
• Downside Protection
• Unlimited Upside
• Flexibility

However, there's no such thing as a free lunch, and in terms of a married put, that means paying for protection, so you'll have to pay a premium to protect your shares. Depending on your asset choice, timeline, and strike price, this might become expensive, with closer strike prices or longer expiration dates costing more. A married put also increases your breakeven price, reducing your potential profitability. Lastly, like every long option position, the put is sensitive to theta, or time decay, meaning the option's extrinsic value decreases as it gets closer to expiration.

Cons:

• Cost of Premium
• Increased Breakeven Price
• Sensitive to Theta (Time) Decay

Conclusion

The married put can be an excellent hedging strategy that protects your shares.

However, protection comes at a cost, so you must consider your situation carefully and balance the cost of the married put against the potential losses. Use every resource and utility at your disposal, including option screeners, to help you decide.

If you need more information about married puts or other trading strategies, visit the Barchart Options Learning Center.