Knowledge Base
Ranker Spread: Short Put (covered or uncovered)
Last Updated: September 2, 2022


Short Put (covered or uncovered)

How are Spreads used in the Brutus Ranker?

A spread type is used in every Brutus Options Ranker strategy in combination with a ticker group to narrow down the creation and evaluation of options trading opportunities to those most relevant to you.  This knowledge-base article gives you a preview of the Short Put (covered or uncovered) spread details, but the full details can only be viewed inside the app.
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Estimated reading time: 1 min

Short Put (Covered Or Uncovered) Payoff Diagram

A short put setup involves selling one put at trade entry (writing a put).  This obligates the seller to buy the underlying shares at any point during the life of the contract at the strike price of the option.  The trade is usually initiated at a strike price near the money or out of the money.  In exchange for selling the put and taking on this obligation, the short put trader receives premium from the counterparty.

The short put setup is frequently used by beginner and seasoned options traders alike.  This setup, when optimized as part of an overall strategy, is often called a “paid-to-wait” strategy, where the trader is compensated for making the commitment to buy the shares at a discount.  This setup is very well suited against stock that you would like to eventually own.

This setup is synthetically equivalent to a “covered call” setup, which is often touted as an excellent strategy for beginner options traders.  The advantages of a short put setup compared to a covered call setup is reduced capital requirements for the put sell, simpler execution and management, and generally higher max profit by using put options vs. call options.

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View More in the Ranker App

This knowledge-base article is only a preview of the Short Put (covered or uncovered) spread.  View more in the Brutus Options Ranker App.  No registration required.
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