A Covered Put is an options strategy that combines a short position in the underlying asset (or a short perpetual) with selling a put option on the same asset.
It’s often used by traders who are neutral to slightly bearish and want to earn additional yield while maintaining downside exposure.
How It Works
When you sell a put, you agree to buy the asset at a specified strike price if the option buyer exercises.
If you already hold a short position, you’re "covered", which means that you can close or offset that short position by taking delivery of the asset through the put assignment.
On Kyan, this strategy typically includes:
1× Short Perp or Spot-equivalent position
1× Short Put Option
Profit and Loss Profile
Maximum Profit: Limited to the option premium received plus any gain on the short position if the price falls.
Maximum Loss: If the price rises significantly, losses occur on the short position.
Breakeven: Current asset price plus the option premium received.
Why Traders Use It
To generate income in stable or gently declining markets.
To hedge against downside volatility in other parts of a portfolio.
To capitalize on high implied volatility through option premium.