When Should You Use This Strategy?
Expect stock to fall significantly
Who Benefits Most?
Bearish traders seeking downside protection
Position Setup
The Long Put consists of the following legs:
- Buy 1100 strike put at $5 premium
How Profit and Loss Work
Maximum Profit: Large: (Strike − Stock price) − Premium paid
Maximum Loss: Limited: Premium paid
Break-even Points: Strike − Premium paid
Timing & Time Horizon
30–90 days
Most traders enter this strategy 30–60 days before their expected move, allowing enough time for the position to develop while avoiding excessive time decay on shorter-dated options.
Capital Requirements
Modest: only premium cost
How to Manage the Position
Close at 50–80% profit; let winners run
- Monitor the position daily, especially as it approaches profitability
- Set clear profit targets and exit rules before entering
- Consider closing early to lock in gains rather than waiting for max profit
- Be prepared to cut losses if the thesis is wrong
Key Risks & What to Watch
- Total loss if stock stays flat or rises
- Time decay erodes value daily
Model Before You Trade
Every strategy performs differently based on entry price, strike selection, and premium levels. Use the interactive Long Put calculator to model the payoff with your expected entry, strikes, and premiums before committing capital.
Educational information only. This guide explains how the strategy works mathematically and typically behaves. It is not investment advice, and past performance does not guarantee future results. Options trading involves significant risk, including the potential loss of premium paid. Paper trade or use small positions while learning.