Covered Put

A covered put pairs a short stock position with a short put at or below the current price, so the premium collected offsets part of the trade while the stock goes nowhere. Both legs are priced from bid, ask, last price and previous close, and profit and loss is mapped across expiration prices.

The short stock leg is the one to watch. Gains stop at the put strike, while a rally has no upper bound and the loss on the borrowed shares is not capped by the option sold.