Covered Put vs Poor Man’s Covered Put

A Covered Put combines short shares with a sold put. A Poor Man’s Covered Put replaces the short shares with a longer-dated ITM put. Both can express a bearish view, but the risk from the foundation of the position is different.

What Are You Choosing Between?

Short stock requires borrowing shares and can lose without limit after a rally. The long put has an expiration date and can lose its premium instead. It also changes delta as the market moves. Compare borrow costs, dividend obligations and option time value rather than treating the nickname as an equivalence.

The Main Differences

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Results for the example positions below, before costs
Compare	Covered Put	Poor Man’s Covered Put
Construction	Short 100 shares and sell one put against that bearish position.	Replace short shares with a longer-dated ITM put.
Example entry	$10,300 net credit	$1,100 net debit
Maximum profit	$800	Depends on remaining option value and exit rule
Maximum loss	Unlimited	Requires the specified exit and assignment assumptions
Breakeven price	$103	Changes with time value and volatility

Entry amounts include the stated stock purchase cost or short-sale proceeds. A net credit is not the broker’s required collateral, and historical stock cost is not new cash invested today.

A Practical Example

Both examples sell the 30-day $95 put for $3. The covered version shorts shares at $100. The PMCP buys a 180-day $110 put for $14, for a $1,100 net debit. At the short expiration, the chart values the remaining 150-day put using the stated model.

XYZ is at $100 when the option trades are entered. Premiums below are per share; each option contract covers 100 shares. Each column shows one complete position, not an equal-capital allocation. Prices are hypothetical and exclude commissions, taxes, dividends, financing costs and early-assignment cashflows.

Exact quantities, strikes, premiums and days to expiration
Position	Example legs
Covered Put	Short 100 shares at $100 Sell 1 $95 put, 30 days, at $3
Poor Man’s Covered Put	Buy 1 $110 put, 180 days, at $14 Sell 1 $95 put, 30 days, at $3

Comparing Value at the First Expiration

Covered Put vs Poor Man’s Covered Put — modeled day-30 profit and loss — At day 30, expiring options use intrinsic value and later options use a European Black–Scholes estimate: 30% IV, 0% continuously compounded interest, no dividends. All remaining options are assumed closed at those values. This is not a forecast or the result of holding through later expirations.

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Modeled day-30 profit / loss in dollars
XYZ price	Covered Put	Poor Man’s Covered Put
$80	$800	$436.58
$95	$800	$651.76
$100	$300	$300.78
$105	−$200	−$2.59
$120	−$1,700	−$630.72

What to Watch For

A Covered Put is not a Cash-Secured Put: one begins with short shares, while the other reserves cash to buy shares. Short-put assignment in a PMCP can create long shares that require funding and management alongside the remaining long put.

Before expiration, time value and implied volatility can change a position’s market value. Short options also create exercise and assignment obligations. Review the full strategy guides for position management and settlement details.

Explore the Strategies

Try the examples:

Covered Put in the strategy builder
Poor Man’s Covered Put — diagonal calculator (enter the example’s legs and dates).

More strategy comparisons