Put Spread — Cheaper Protection
Walter wants to insure 200 SOL with a $90 Put, but 120 days of cover costs $2,160. He sells two cheaper Puts at $65 and $60 to get some back, and the net is $1,825 — only about 15% cheaper. You'll see why far-out Puts pay so little, where the cover is full, and where it stops below $60.
The problem: a plain Long Put is too expensive
In the previous lesson we saw: a Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → for a 200 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → quantity, strike $90, costs $10.80 per SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → — $2,160 over 120 days (2026-09 market level, SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → IVIVImplied Volatility — the volatility the market expects. SOL IV is roughly 70-80%.Read the lesson → around 50%; the premium moves every day). Compared with the portfolio's value (126 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → x $88 = $11,088), that's 19.5% over 120 days, or about ~59% annualized. Too expensive.
The solution — a Put Spread: you buy protection (Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson →) and at the same time sell another piece of protection (Short PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson →). That gets you some of the money back.
Picture home insurance. Full coverage with no deductible costs $1,000 a year. But if you agree to cover the first $5,000 of losses yourself, the insurance costs less. You take on part of the risk, but you save money. A Put SpreadPut SpreadLong put + short put. Cheaper protection than a plain put, but with limited coverage.Read the lesson → works exactly the same way. One difference: in the options market, deep out-of-the-money protection sells for very little, so the saving is usually far more modest than intuition suggests — you'll see that with real proportions in a moment.
How a Put Spread works
It's made up of two legs:
| Leg | What you do | Strike | Quantity | Price |
|---|---|---|---|---|
| Upper | Buy a PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → (protection) | $90 | 200 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → | -$2,160 (you pay) |
| Lower | Sell a PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → (get part back) | $65 | 100 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → | +$200 (you receive) |
| Net cost | -$1,960 |
You saved $200 — that's about 9% cheaper. Not much, and there's a reason: the $65 strike sits 26% below the price, and protection that far out sells for roughly $2 per SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →. A deep OTMOTMOut of The Money — an option with no intrinsic value, only time value.Read the lesson → PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → always carries a small premium — which is why a spread cuts the cost far less than it first appears.
Full protection works between $90 and $65. Below $65 protection still grows, but at half speed — the PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → you sold starts costing you and eats up half the move. BreakevenBreakevenThe breakeven point — the price at which a position is neither profitable nor at a loss.Read the lesson → for this two-leg version: 200 x ($90 - S) = $1,960 → S = $80.20. So this is cheaper than a plain Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson →, but it protects you less once the price drops deep.
Our strategy's structure (three legs)
We use three legs — with two Short PutsPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson →:
| Position | Strike | Quantity | Price | Delta (per 1 SOL) |
|---|---|---|---|---|
| Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → | $90 | 200 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → | -$2,160 | -0.42 |
| Short PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → | $65 | 100 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → | +$200 | +0.18 |
| Short PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → | $60 | 100 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → | +$135 | +0.12 |
| Net | -$1,825 | -54 (position delta) |
Net cost: $1,825 over 120 days = 16.5% of the $11,088 portfolio, or about ~50% annualized (instead of ~59% for the Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → alone). The premiums reflect the 2026-09 market level (SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → IVIVImplied Volatility — the volatility the market expects. SOL IV is roughly 70-80%.Read the lesson → around 50%) and change daily — always check your own numbers on the exchange.
Intuition says that selling two PutsPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → should cut the cost several times over. In a real market it doesn't: the $65 and $60 strikes sit 26% and 32% below the price, so their premiums are only about $2.00 and $1.35 per SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →. Together they cover $335 out of $2,160 — roughly 15%. A spread does lower the cost, but by tens of percent, not by multiples. Any source promising "almost free" protection is either using short strikes much closer to the price (much more risk) or is not using real market premiums.
Two different bases — don't mix them up: options P&LP&LProfit & Loss — used to evaluate strategy results.Read the lesson → is calculated on the options quantity (200 / 100 / 100 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →), while the protection cost in percent is calculated on the portfolio value (126 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → x $88 = $11,088). Those quantities differ on purpose.
The DeltaDeltaAn option's price sensitivity to the underlying price. Delta 0.50 means: if the underlying rises $1, the option price rises about $0.50.Read the lesson → column shows sensitivity to a $1 price move, per one SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →. Position delta comes from multiplying by quantity: -0.42 x 200 = -84, +0.18 x 100 = +18, +0.12 x 100 = +12 → net -54. That means: if SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →'s price drops $1, this options structure gains about $54.
Two smaller Short PutsPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → ($65 and $60) instead of one large one spread the risk across several levels. When SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → is between $60 and $65, only one leg (100 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →) is active — below $60 both are active. Risk arrives gradually, not in one step.
What happens at different prices?
| SOL price | Long Put $90 | Short Put $65 | Short Put $60 | Total result |
|---|---|---|---|---|
| $120 | -$2,160 | +$200 | +$135 | -$1,825 |
| $100 | -$2,160 | +$200 | +$135 | -$1,825 |
| $90 | -$2,160 | +$200 | +$135 | -$1,825 |
| $80 | -$160 | +$200 | +$135 | +$175 |
| $70 | +$1,840 | +$200 | +$135 | +$2,175 |
| $65 | +$2,840 | +$200 | +$135 | +$3,175 |
| $60 | +$3,840 | -$300 | +$135 | +$3,675 |
| $50 | +$5,840 | -$1,300 | -$865 | +$3,675 |
| $40 | +$7,840 | -$2,300 | -$1,865 | +$3,675 |
Most important: between $65 and $90 — full protection. Below $60 — protection is fixed at $3,675.
Breakeven: the options position turns from negative to positive at 200 x ($90 - S) = $1,825 → S = $80.88. Below this price the options pay off, but that's not a profit — they're offsetting the falling value of SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →.
Map of the protection zones
| Price zone | What happens | Protection level |
|---|---|---|
| Above $90 | OptionsOptionA financial contract that grants the right (but not the obligation) to buy or sell at a set price.Read the lesson → expire worthless | None — you lose the $1,825 premium |
| $65 — $90 | Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → earns | Full protection |
| $60 — $65 | Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → earns, Short PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → starts costing | Partial protection |
| Below $60 | All options are active | Fixed protection ~$3,675 |
Tail risk: Below $60 protection stops growing. If SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → fell 80% (to about $18), the Short PutsPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson →' losses would grow at the same pace as the Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson →'s gains, so the options result would stay at $3,675 — but SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →'s value would keep falling. That's the trade-off: cheaper protection, but limited coverage in extreme scenarios.
Spread vs full protection
| Long Put $90 only | Put Spread (3 legs) | |
|---|---|---|
| Cost over 120 days | $2,160 | $1,825 |
| Annualized (on $11,088) | ~59% | ~50% |
| Saving | — | ~15% |
| Protection from -30% (to ~$62) | Full | Almost full — already in the partial zone |
| Protection from -50% (to ~$44) | Full | Fixed ($3,675) |
| Protection from -70% (to ~$26) | Full | Fixed ($3,675) |
Both costs are high — and that is the real message of this lesson. At the 2026-09 market level, permanently insuring the full portfolio eats a large share of any return, so in practice protection is bought for certain periods or for a smaller quantity, not continuously for everything.
Short Put risk — what's the worst that can happen?
When you sell a $65 PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → (100 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →), you take on the obligation to "buy" SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → at $65. If the price falls below that:
- SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → $50 — Short PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → $65 loss: ($65 - $50) x 100 = $1,500 (minus the $200 premium received — $1,300 net)
- SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → $40 — Short PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → $65 loss: ($65 - $40) x 100 = $2,500 (net -$2,300)
But at the same time, Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → $90 (200 SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson →) generates:
- SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → $50 — Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → value: ($90 - $50) x 200 = $8,000 (net +$5,840)
So the options position's result is still positive (+$3,675), even though SOLSOLSolana's native token. Used to pay gas and as collateral.Read the lesson → itself has dropped sharply. A problem only arises if the Short PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → is too large.
How to reduce the cost even further?
| Method | Effect | Risk |
|---|---|---|
| Lower Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → strike | Cheaper | Less protection |
| Higher Short PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → strike | More premium | Higher risk |
| More Short PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → legs | More premium | More tail risk |
| Shorter timeframe | Cheaper | Needs rolling more often |
Our strategy chose a balance: $90 / $65 / $60 with 120 days.
The spread and its daily cost
Put SpreadPut SpreadLong put + short put. Cheaper protection than a plain put, but with limited coverage.Read the lesson → theta (how much it costs per day):
| Leg | Per day |
|---|---|
| Long PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → theta | ~-$7.30 |
| Short PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → $65 theta | ~+$0.85 |
| Short PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson → $60 theta | ~+$0.55 |
| Net Put Spread theta | ~-$5.90 |
Add the Short CallCallAn option type that grants the right to BUY at the strike price. The opposite of a put.Read the lesson → $160 theta (~+$0.20) and the net theta across all options stays around -$5.70 per day. These figures are approximate — 120 days to expiry at IVIVImplied Volatility — the volatility the market expects. SOL IV is roughly 70-80%.Read the lesson → around 50%; decay accelerates as expiry approaches.
Notice this: the legs you sold cover only about a quarter of the bought PutPutAn option type that grants the right to SELL at a set price. Used as insurance.Read the lesson →'s time decay, because deep OTMOTMOut of The Money — an option with no intrinsic value, only time value.Read the lesson → options hold little time value and therefore little theta. So the protection has a real daily cost, and it is portfolio income (LPLPLiquidity Provider — deposits tokens into a pool and earns a share of trading fees.Read the lesson → fees, interest) that has to offset it.
With a Put SpreadPut SpreadLong put + short put. Cheaper protection than a plain put, but with limited coverage.Read the lesson → you can now build protection to fit your own budget — you choose how much risk you take on yourself and how much protection you buy, instead of taking whatever price comes first.
Next step: let's look at how a Covered CallCovered CallAn options strategy: sell a call option while holding the underlying asset. Generates premium income but caps upside.Read the lesson → generates extra income.
Spread logic only sticks once you calculate it with real premiums. This paper exercise (~20 min) is a plan on paper — no trading.
This is a paper plan — DON'T BUY or SELL anything. In reality a Short Put requires collateral and carries real risk, so first we learn to calculate it.
This is learning, not investing — use only small amounts you treat as tuition.
You just calculated a three-leg Put Spread's net cost and protection zone yourself — a structure most crypto investors can't even name.