Covered put is a short position in a put option where you simulteneously hold a short position of the same quantity in the base asset. As the name covered implies, you can cover the losses of the put position, originating from a fall in the base price, by buying back the underlier cheaper than it was sold. Covered puts have limited profit potential and unlimited loss, if the underlier price goes way above the strike of the put.
See also covered call, naked put, naked call.
Want to learn more? Download now an interactive reference application for iPhone.
The screenshot shows the following portfolio:
European put struck at 10.000 with expiry in 30 days
This is an excerpt from iOptioneer option trading reference application. In order to build the real-time dynamic strategy graph and run simulations you will need to download the application from App Store.