Long Put
Prerequisite strategies: none — with the long call, this is one of the two structures you may trade first, because both are paid for in full. Read UK options basics and assignment and expiry first, and hold one long put to expiry before attempting the cash-secured put or covered call.
Why this structure exists
A long put separates your downside from your ownership. Selling the shares removes the risk, but it also removes the upside and crystallises a gain. A put keeps the shares, the dividends and the upside, and rents a floor under the price for a fixed number of days at a fixed, known cost.
It is also the only sane way for a beginner to be short: shorting outright, or through a CFD, exposes you to a loss with no ceiling and a margin call in the middle of it, while a put caps the loss at the premium.
Why not simply sell the shares? Usually you should — selling costs no premium and never expires. Buy the put only when you need to keep holding: a gain you do not want to trigger this tax year, a locked-in holding, or one dated event you want cover through.
Construction
One leg. You are the buyer, so there is no obligation, no collateral and no assignment risk to you.
| Leg | Buy/Sell | Quantity | Strike rule | Expiry rule | Target delta | Typical price |
|---|---|---|---|---|---|---|
| Put on the underlying | Buy to open | 1 contract = 1,000 shares (ICE UK) or 100 shares (US listed) | Hedge: 3–8% below spot. Directional: at the money | 60–150 days; never under 30 | −0.30 to −0.45 | 3–6% of the value covered |
| Net | Debit | 1 contract | Paid in full at trade date; nothing further can be demanded | Premium × contract size + commission | ||
Two hard constraints: contracts × contract size ≤ shares held for a hedge — one ICE contract covers 1,000 shares, so a 400-share holding cannot be hedged with one — and total premium ≤ 2% of portfolio value.
Risk box
Figures are the worked example below: one BP December 500p put bought at 24p with the shares at 520p.
Max loss = premium + commission, reached whenever the share sits at or above the strike at expiry. Max profit = (strike − premium − commission per share) × 1,000, requiring BP to be worthless. Breakeven = strike − premium − commission per share. Capital required equals the debit: no margin, no buying-power reduction.
Entry criteria
You are buying implied volatility as well as a direction, so the gate is about the price you pay, not only about what you expect.
| Gate | Level 1 rule, and why |
|---|---|
| IV rank | Buy below 30, never above 50 — you are long vega, so dear volatility loses money even when the share falls |
| DTE window | 60–150 days; under 30 the decay rate roughly doubles |
| Strike / delta | −0.30 to −0.45 delta, i.e. 3–8% out of the money for a hedge |
| Liquidity | Bid–ask within 10% of the mid, size quoted both sides — ICE UK series are far thinner than US chains |
| Underlying | A FTSE 100 name with a listed series, or a US name you would hold anyway; a £5 share is about £5,000 per ICE contract |
| Event calendar | Expiry beyond the results date you care about; never buy the day before results |
Do not enter if: the premium exceeds 2% of the portfolio; volatility has already spiked on the news you are reacting to; you cannot state max loss and breakeven in pounds; the series has no open interest; or you are buying to soothe a position that has already gone wrong.
Greeks at entry and how they evolve
Modelled on the worked example: 123 days, 28% implied volatility; the ±1 SD columns use the 30-day expected move of about 42p.
| Greek | At entry (123 DTE) | 62 DTE, price unchanged | 7 DTE, price unchanged | After +1 SD (562p) | After −1 SD (478p) |
|---|---|---|---|---|---|
| Put price | 24p (£240) | 15p (£150) | 1.6p (£16) | 8.7p (£87) | 40p (£403) |
| Delta | −0.38 | −0.35 | −0.15 | −0.19 | −0.60 |
| Gamma | 0.04 per 10p | 0.06 per 10p | 0.12 per 10p | 0.03 per 10p | 0.06 per 10p |
| Theta | −£1.26 a day | −£1.75 a day | −£2 to −£3 a day | −£1.12 a day | −£1.35 a day |
| Vega | £11.31 per IV point | £7.88 per IV point | £1.70 per IV point | £7.59 per IV point | £9.17 per IV point |
Theta decides this trade. With the price unchanged the position is worth £150 after two months and £16 in the final week: you can be right about the company and still lose 93% of the premium to timing. The character flips near 21 days, when daily decay overtakes the delta you are likely to earn. Vega is the second trap — bought at 40% volatility and sold at 25%, this put loses about £170 on volatility alone.
You hold 1,000 BP shares at 520p and want cover through the winter
BP traded around 520p on 17 August 2026. On ICE Futures Europe one BP option is rights over 1,000 shares, quoted in pence per share, physically delivered, tick 0.25p (£2.50). You buy one December 2026 500p put — third Friday, 18 December, 123 days away — at an illustrative 24p.
Base case — BP drifts to 505p by 18 December. The put finishes out of the money.
Adverse case — BP falls to 430p on a profit warning. The put is 70p in the money with a week left, quoted 71p.
Exercising costs money either way. It throws away the 1p (£10) of time value still in the option, and if you are running this directionally with no shares to deliver it also forces you to buy 1,000 BP shares at 430p (£4,300) plus 0.5% SDRT of £21.50 before delivering them at 500p: £437.10 against £467.20 for simply selling the option — £30.10 worse.
Favourable case — BP rallies to 570p. The put is nearly worthless at 1p.
On a US-listed name the contract is 100 shares and the premium is in dollars — the tax computation is not. Each leg converts to sterling at the spot rate on its own date: a put bought for $240 at 1.30 costs £184.62 and sold for $240 at 1.20 raises £200.00, a £15.38 chargeable gain on a position that made nothing in dollars — before your broker's conversion spread.
This is a single, hand-picked, favourable scenario. It is not a typical or expected outcome. The premium is modelled, not a live quote — price your own trade from the chain.
Management and adjustment
At this level you do not adjust; you close. One leg, no assignment risk to you and no collateral to defend means every "adjustment" is a second trade in disguise — and that is how a £241 loss becomes a £700 loss.
Roll down and out — buy back your put, sell a lower strike further out — is permitted once, only for a net credit, and only after the share has already moved your way and you want to bank most of the gain while keeping cover. Never roll for a net debit: adding money to a losing position is doubling down, not defending.
If volatility expands after entry, take the gain you did not earn from direction, because it will be handed back. If volatility collapses, accept you overpaid and apply the stop. If the share gaps below your strike, close and bank it.
Exit rules
Four named exits, written on the ticket before you place the order.
- Profit target: close when the put is worth twice what you paid — 48p here, a £237.20 gain. Long-premium wins are rare enough that taking them mechanically beats holding out.
- Stop: close when the put has lost half its value — 12p here, a £122.80 loss. Mechanical, checked at the close.
- Time stop: close at 21 days to expiry regardless of P&L, because decay accelerates and the remaining extrinsic value is not worth owning.
- Assignment-avoidance exit: if the put is in the money, close it before the last trading day — exercise on an ICE series means delivering 1,000 real shares, and buying them to deliver costs 0.5% SDRT.
If all four are silent, do nothing. Doing nothing is a position.
Margin and broker reality
A cash account is enough: you pay £241.40, and that is the entire initial and maintenance requirement for the life of the trade. No uncovered-option permission is needed — only basic options permission, granted after an appropriateness questionnaire you answer honestly.
Access is the harder problem. Hargreaves Lansdown, AJ Bell and Trading 212 offer no listed options at all, in any account; Interactive Brokers publishes UK stock options at about £1.40 a contract all-in. Then check the chain — a 2p-wide market on a 24p option is an 8% round-trip cost before you have been right about anything.
|delta| ≥ 0.30 at entry. If the put that satisfies it costs more than you want to spend, the trade is too big for the account — reduce the position, not the strike.What to trade instead
Simpler: sell the shares. No premium, no expiry, risk removed completely. The only reasons to prefer the put are keeping the upside, keeping the holding intact, or deferring a disposal. On a holding you cannot sell, the collar pays for the put by selling a call above the market, at the cost of capping the gain.
More precise, one tier up: the bear put spread sells a lower-strike put against yours, cutting the cost by roughly a third and the decay with it. The trade-off is a ceiling on profit and a margin account you do not yet need.
First-trade checklist
- Paper-trade gate: three simulated long puts logged to expiry — one lapsed, one closed at the target, one closed at the stop — before risking money.
- Confirm the account: a GIA with basic options permission. Not an ISA, almost certainly not a SIPP.
- Read the multiplier and settlement style off the contract specification, not a forum post.
- Pick the expiry (60–150 days), then the strike (−0.30 to −0.45 delta), then check the bid–ask width.
- Compute three numbers in pounds: outlay, breakeven, max loss. If you cannot, stop here.
- Place a limit order at the mid, never a market order.
- Log it the same day: date, underlying, strike, expiry, premium, contract size, commission, FX rate, tax point.
- Write the exits on the ticket and set a reminder for the 21-day time stop.
Risk statement
A long put is a wasting asset. The most likely outcome of any single purchase is that it expires worthless and you lose 100% of what you paid — the normal result, not the bad one, which is why the premium must be money you can lose in full. Options are complex instruments, not suitable for every investor. This page is education, not advice.