A ONE-STOP PORTAL OF INFORMATION FOR FUTURES AND COMMODITIES TRADERS
A covered put is a put option sold against a short
futures position. Premium income is earned if futures
prices are stable to lower. In the event the options
contract is exercised, it will be offset by the short
futures position. This position is bearish and is helped
by reduced volatility and the passage of
time.
Profits are limited on the downside; losses
are unlimited as prices rally. For a hedger, the premium
of the put increases income, while offsetting the price
level of the physical product.
