# Long Put Option Strategy

## What are the characteristics of this option strategy?

The long put option strategy involves buying a put option for an underlying asset in anticipation of a price decline. This strategy is similar to the covered call writing strategy, whereby the investor can both limit the losses and profit from a decrease in the underlying stock price without having to own the underlying asset.

## Is this a bullish, bearish or neutral strategy?

The long put option strategy is considered to be bearish, since it is designed to profit from a decrease in the underlying asset’s price while limiting losses by the premium collected.

## Is this a beginner or an advanced option strategy?

The long put option strategy is more suitable for intermediate to advanced option traders as it requires a greater understanding of options, the underlying asset and market conditions to execute this strategy profitably.

## In what situation will I use this strategy?

The long put option strategy is best used when the investor expects a decrease in the stock price but does not want to own the underlying asset. This strategy is ideal for investors with a limited budget who want to play the bearish market but do not want to commit too much capital.

## Where does this strategy typically fall in the range of risk-reward and probability of profit?

This strategy usually has high risk due to the cost of the long put option and is typically suited for investors who are willing to accept higher risk in exchange for the potential of higher rewards. The probability of profit increases when the underlying asset’s price moves in the direction of the investor’s expectation.

## How is this strategy affected by the greeks?

This strategy is mainly affected by the delta and gamma greeks. Delta measures the rate of change of the option’s price with respect to the underlying asset’s price, while gamma measures the rate of change of delta. The higher the delta and gamma of a long put option, the more the option will increase in value as the underlying asset’s price moves downwards.

## In what volatility regime (i.e VIX level) would this strategy be optimal?

This strategy is best used when the underlying asset’s volatility is high. Since the option’s price increases with volatility, the higher the volatility, the greater the potential for profits with the long put option strategy. Ideally, one should initiate the long put option strategy when the VIX level is above 20.

## How do I adjust this strategy when the trade goes against me? And how easy or difficult is this strategy to adjust?

The long put option strategy can be adjusted in various ways, depending on the investor’s risk tolerance and trading experience. For example, the investor can close out the position and limit losses, or they can roll the option position to extend the period of the option or adjust the strike price. Furthermore, an experienced trader can also liquidate the long put option position and establish a Christmas tree spread with put option strategy or a short guts long guts option strategy to reduce losses. Adjusting the strategy is relatively easy as long as the investor has sufficient market knowledge.

## Where does this strategy typically fall in the range of commissions and fees?

The fees associated with the long put option strategy are the same as other option strategies, which include premiums and commissions. Premiums are paid on the put option when it is purchased, while commissions are paid when the option is closed out. Of course, the commissions and fees vary between brokers and can also incur additional charges when adjusting the strategy.

## Is this a good option income strategy?

Yes, the long put option strategy can be a good option income strategy as it allows investors to collect premiums when the underlying stock decreases in price. However, it is important for investors to understand their risk tolerance and the risks associated with the strategy before jumping in.

## How do I know when to exit this strategy?

The exit strategy depends on the investor’s specifications and expectations. Generally, if the long put option position is profitable, the investor can choose to close the position or roll the option position up and extend the life of the option. If the long put option position is at a loss, the investor can choose to close the position or adjust the option position to reduce the losses.

## How will market makers respond to this trade being opened?

Market makers will typically provide liquidity for this trade as it is well-known and regularly used among investors. However, due to the risky nature of the trade, market makers will often provide liquidity at a higher price.

## What is an example (with calculations) of this strategy?

Let’s say the current price MSFT is $287 and a put option with a strike price of $275 is trading at $4. The investor buys 1 option contract. The investor pays $415 for the option contract.

If the stock price is $260 at the expiration of the option contract, the investor will make a net profit of around $1100.

If the stock price is $290 at the expiration of the option contract, the investor will lose the entire $415 paid for the option.

MarketXLS makes it easy to find the right strategy no matter how experienced or inexperienced you are. MarketXLS’s Strategy Builder enables traders to quickly identify and test hypothetical strategies to evaluate their risk and potential profits no matter how complex or simple the strategy. MarketXLS also provides tools such as the Options Strategy Scanner, greeks calculator and volatility indicator to help traders craft the perfect strategy.

Here are some templates that you can use to create your own models

Long Put Option Strategy

Protective Put / Synthetic Long Call Option Strategy

Diagonal Spread with Puts Option Strategy

Long Butterfly with Puts Option Strategy

Bear Put Spread Option Strategy

Bull Put Spread Option Strategy

Collar Option Strategy

Long Albatross Spread

Long Calendar Spread With Puts Option Strategy

Long Calendar Spread with Puts Option Strategy

Christmas Tree Spread With Puts Option Strategy

Christmas Tree Spread With Puts Option Strategy

Long Gut

Long Put Ladder

Iron Butterfly Option Strategy

Long Strangle Option Strategy

Iron Condor Option Strategy

Risk Reversal Option Strategy

Married Put

Long Put Synthetic Straddle

Search for all Templates here: https://marketxls.com/templates/

Relevant blogs that you can read to learn more about the topic

Long Put Option Strategy-Tracking And Managing(With Excel Template)

Long Put Option Strategy-Managing And Tracking

Boost Your Profits with Put Option Strategies

How to hedge a drop in S&P 500 Using MarketXLS

Bear Put Spread Option Strategy (Explained With Excel Template)