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A married put is an options strategy in which you buy a put option on a stock you already own or are buying simultaneously, creating downside protection without selling the stock. The put option gives you the right to sell the stock at the option's strike price regardless of how far the stock falls. If the stock drops below the strike price, the put gains value and limits your loss. If the stock rises, you let the put expire and keep the gain on the stock, minus the cost of the put premium you paid.
Think of a married put as buying insurance on your car: you hope you never use it, but if you crash, the payout covers your loss.
You buy shares of a stock and simultaneously purchase a put option on the same number of shares. The put option specifies a strike price, which is the floor price at which you can sell. The further the strike is below the current stock price, the cheaper the put, but the more downside you accept before the protection kicks in.
A stock trading at $100 with a $95 put costs you less in premium than a $100 put because the protection is further from the current price. With the $95 put, your maximum loss on the position is capped at approximately $5 per share plus the put premium paid. Your maximum gain remains unlimited as long as you hold both the stock and the put.
The married put has a clear breakeven calculation. Your total investment is the stock price plus the put premium paid. If you buy a $100 stock and pay $3 for a one-month put, your breakeven is $103. The stock must rise to $103 just for you to break even on the entire position at expiration.
This premium cost is the primary drawback. If you consistently buy put protection on every stock position, the cumulative premium expense becomes a significant drag on portfolio returns over time. The strategy makes the most sense when the cost of protection is justified by the specific risk you face, such as earnings announcements, macroeconomic uncertainty, or a concentrated position in a single stock where you cannot diversify away the risk.
The terms married put and protective put describe functionally identical strategies. A married put technically refers to the simultaneous purchase of stock and put, while a protective put often describes buying a put on shares you already owned before the option purchase. The IRS makes this distinction for tax purposes: a married put position in which the put and stock are purchased on the same day may qualify for preferential tax treatment that allows the long-term holding period of the stock to remain intact despite the protective position.
Buying a put on stock you already hold creates an offsetting position in IRS terms. The straddle rules under Section 1092 of the Internal Revenue Code can suspend the holding period of the underlying stock and require you to capitalize certain carrying charges rather than deducting them currently. A married put bought on the same day as the stock purchase and held together generally avoids the straddle rules. A put purchased after the stock was already acquired, particularly if the stock has a loss, may trigger the straddle rules and delay loss recognition.
Given the complexity, consult a tax adviser before establishing put protection on positions with significant embedded gains or losses.
The married put is most appropriate in three situations. First, when you own a concentrated stock position that you cannot or do not want to sell, such as a founder's stake or shares subject to lockup restrictions. Second, around known binary events such as earnings reports, regulatory decisions, or clinical trial results, where a negative outcome could cause a rapid large decline. Third, when you have a large unrealized gain and want to lock in most of it before year-end without triggering the sale and the capital gains tax in the current year.
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