Investment Type:Debit
Strike Prices: ITM/ATM/OTM
Expiration Month: No Restriction
Composition: Sell Stock + Sell Put

Covered Put is the opposite side of Covered Call. This strategy is hard to use not because it’s complicated, but because the nature of the strategy is also confusing. With this strategy, we expect a stock to go down slowly in the long term while collecting premium every month.

We short sell a stock and then we received premium every month by selling slightly-OTM Put every month. This strategy is not applicable for most of the stocks as there is no public company in the world who wants to see its stock price to go down steadily for the longer term, unless it’s being hit by larger issues (such as housing market issues). This is why Covered Put is less popular than Covered Call.

OTM covered put gives more yield but less cushion for the breakeven point. While ITM covered put gives less yield and more cushion for the breakeven point.