• Skip to primary navigation
  • Skip to content
  • Skip to primary sidebar
  • Skip to footer
StoneX®

Trade Futures, Spreads and Options with Confidence.

Top Navigation

  • Open a Futures Account
  • Sign Up
  • Log in
  • 1.800.800.3840

Primary Navigation Menu

  • About
    • Who We Are
    • Services
    • Risk Disclosure
    • COVID-19
  • Trade
    • Broker-Assisted
    • Self-Directed / Online
    • Request Pricing
  • Hedge
    • Ag Marketing Plan
    • WASDE Analysis
    • Grain Resources
    • Livestock / Dairy Resources
    • Request Pricing
  • Invest
    • Automated Strategies
    • Managed Futures
    • Request Pricing
  • Advisories
    • GENERAL / FUNDAMENTAL
      • DT Newsletter
      • Insider Market Advisory
      • Turner’s Take Newsletter & Podcast
    • TECHNICAL ANALYSIS
      • The Cullen Outlook
      • Data Feed Trade
      • Jarboe Trading Journal
      • Trade Spotlight
    • AG MARKETING
      • Cattleman’s Advisory
      • Technical Ag Knowledge
      • Turner’s Take Ag Marketing
    • THIRD-PARTY RESOURCES
      • CFRN
      • Moore Research Center, Inc. (MRCI)
      • OptionWorks®
      • TASMarketProfile.com
  • Education
    • CME Group Resource Center
    • CME Group Offers
    • Small Exchange Resources
    • Guides
    • Frequently Asked Questions
    • Order Entry Handbook
  • Blog
    • Futures 101
    • Ag Marketing
    • Tips & Strategies
    • Trading Advisories
  • Resources
    • Trading Software
    • Quotes and Charts
    • Futures Calendars
    • Contract Specifications
    • Margin Requirements
    • Futures Calculator
  • Accounts
    • Apply
    • Access My Account
    • Funding
  • Contact
Home / Education / Futures & Options Strategy Guide / Short Put

Short Put

Overview

Pattern evolution:
Short Put

Learn 21 futures and options trading strategies in this complimentary,  easy-to-read guide. Download Now >>

When to use: If you firmly believe the market is not going down. Sell out-of-the-money (lower strike) options if you are only somewhat convinced, sell at-the-money options if you are very confident the market will stagnate or rise. If you doubt market will stagnate and are more bullish, sell in-the-money options for maximum profit.

Profit characteristics: Profit limited to premium received from put option sale. At expiration, break-even point is exercise price A – premium received. Maximum profit realized if market settles at or above A.

Loss characteristics: Loss potential is open-ended. Loss increases as market falls. At expiration, losses increase by one point for each point market is below break-even. Because risk is open-ended, position must be watched closely.

Decay characteristics: Position benefits from time decay. The option seller’s profit increases as option loses its time value. Maximum profit from time decay occurs if option is at-the-
money.

CATEGORY: Directional
SYNTHETICS: Long instrument, short call

Example

Short Put Example

Scenario:
This trader feels very strongly that Australian Dollar futures will not fall. He thinks, though, that the market has an equal chance of going up or leveling out. He also expects implied volatility to fall about 11%. The trader decides to sell a put option.

Specifics:
Underlying Futures Contract: March Australian Dollar
Futures Price Level: 0.5500
Days to Futures Expiration: 50
Days to Options Expiration: 40
Option Implied Volatility: 14.1%
Option Position: Short 1 Mar 0.5500 Put + .0111 ($1110)

At Expiration:
Breakeven: 0.5389 (0.5500 strike – 0.0111 credit)
Loss Risk: Unlimited; with losses increasing as futures fall past 0.5389 breakeven.
Potential Gain: Limited to the premium received 0.0111 ($1110). This occurs when futures is above 0.5500 strike at option expiration.

Things to Watch:
As with all unlimited risk situations, the trader must watch this position carefully. Special consideration must be give to foreign currency trading, due to foreign and domestic central bank policy changes. The worst scenario is to be in this position with volatility rising and futures falling. Always re-evaluate this position at some predetermined point.

New call-to-action

Additional Futures & Options Strategies

  • How to Use This Guide
  • Long Futures
  • Long Synthetic Futures
  • Short Synthetic Futures
  • Long Risk Reversal
  • Short Risk Reversal
  • Long Call
  • Short Call
  • Long Put
  • Bull Spread
  • Bear Spread
  • Long Butterfly
  • Short Butterfly
  • Long Iron Butterfly
  • Short Iron Butterfly
  • Long Straddle
  • Short Straddle
  • Long Strangle
  • Short Strangle
  • Ratio Call Spread
  • Ratio Put Spread
  • Ratio Call Backspread
  • Ratio Put Backspread
  • Box or Conversion

Contents Courtesy of CME Group.

Primary Sidebar

Tips & Strategies

How Does Inflation Affect Markets?

The highest inflation measure in more than 40 years has left many markets in utter disarray: Nasdaq is at its lowest since 2020, interest rates are their highest since 2007, and the US dollar is the strongest it’s been since the early aughts

The End of an Era for the Euro

If you started trading in the last two decades, you’ve only known a world in which the euro is worth more than the US dollar. You’d have to go all the way back to 2002 to find data points representing the EUR/USD conversion rate that start with a zero to the left of the decimal point.

Charts

Probabilities are Accurate Until They Aren’t

What do all the probabilities in your life have in common? They’re all dynamic – constantly changing. At the conclusion of the event a binary 0% or 100% is realized, but the journey to that ending can witness wild swings in either direction….

More Tips & Strategies

  • How the Fed Affects Interest Rates
  • Neutral Trading Strategies for an Inactive Market
  • Technical Analysis 101: What Is the Parabolic SAR?
  • OHLC Charts vs. Candlestick Charts: Which Is Better?
  • How to Harness the Power of Moving Average Crossovers
  • Technical Analysis of Stocks: Understand the Pros and Cons
Trustpilot

Footer

Site Navigation

  • Frequently Asked Questions
  • About Us
  • Customer Reviews
  • Contact Us
  • Futures Blog
  • Open a Futures Trading Account
  • Media Resources
  • Fund Your Account
  • Legal Notices

Contact Us

StoneX Financial Inc.
Daniels Trading Division
230 South LaSalle Suite 10-500
Chicago, IL 60604
+1.312.706.7600 Local / Int'l
+1.800.800.3840 Toll-Free
+1.312.706.7605 Fax

Connect with Us

Trustpilot
Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

  • Risk Disclosure
  • Privacy Policy
  • California Residents Privacy Notice
  • Terms of Use
  • Back to top
 

Loading Comments...
 

You must be logged in to post a comment.