Protective Put Calculator

What Is a Protective Put?

A protective put involves owning 100 shares of stock and buying a put option — typically at a strike below the current stock price, though it can also be at or above. The put acts as insurance: if the stock drops below the strike, the put locks in a minimum selling price. You keep all upside above the breakeven but pay the put premium for protection.

Choosing a lower strike reduces the premium cost but provides less protection; a higher strike (even above the stock price) offers more protection but costs more. This is a popular hedging strategy for investors who are bullish long-term but want to limit downside risk during periods of uncertainty.

Key Characteristics

• Max Profit: Unlimited (stock rises, less put cost). The put expires worthless and you keep all gains above the breakeven.
• Max Loss: (Stock Price - Strike + Premium) × 100 × Qty. Limited by the put floor — the stock can fall to $0 and your loss is still capped.
• Breakeven: Stock Price + Premium per share
• Outlook: Bullish with downside protection
• Cost: Net debit (stock purchase cost plus put premium paid)
• Time Decay: Works against the long put — the protection erodes over time as the put loses value

How to Read the P/L Chart

The solid blue line (At Expiration) shows the protective put payoff: below the strike, the P/L is flat at the max loss (the put floor protects you). Above the strike, profit rises linearly as the stock price increases — there is no cap on upside.

The dashed dark blue line (Today / T+0) represents the theoretical P/L at trade entry, computed using Black-Scholes for the long put. The smooth curve shows how the position value changes with the stock price while time value remains in the option.

IV Mode vs. Premium Mode

IV Mode: Enter implied volatility, and the calculator uses Black-Scholes to estimate the put premium. This mode also enables the “Today (T+0)” P/L curve on the chart, showing theoretical value before expiration.

Premium Mode: Enter the exact premium you paid (or expect to pay). Useful when you know the actual market price. Only the expiration payoff curve is shown because IV is needed to compute theoretical values before expiration.

When to Use a Protective Put

• You own shares and want downside protection during uncertainty
• Before earnings, macro events, or periods of elevated risk
• You are bullish long-term but worried about short-term drops
• Alternative to a stop-loss order (put won't be triggered by intraday wicks)
• You want to maintain upside exposure while limiting maximum loss