Covered Put Writing for Equity Options

What this video covers

• How a covered put is built: short 100 shares of the underlying plus one short put against that short position
• Why the position is considered "covered": the writer already needs to buy shares to close the short, so assignment at the strike closes the position cleanly
• The maximum gain formula: (short sale price minus strike) plus premium received, and why gain is capped at the strike
• Why maximum loss is theoretically unlimited, since the underlying stock can rise without a ceiling and the premium offsets only a small piece
• The break-even formula: short sale price plus premium received, and the trap that break-even moves UP (opposite of a covered call, where it moves down)
• When the strategy makes sense: income generation in flat to slightly bearish markets, plus a partial (not full) hedge on the short stock position
• The covered call vs covered put asymmetry: covered call loss is large but bounded at zero, covered put loss has no upper bound