Short Put

Explore the Short Put strategy. This guide covers the basics of this popular options trading strategy, including its risks, rewards, and structure.

Directional exposure

Neutral to Bullish

Risk level


Volatility exposure:



Selling a put means agreeing to buy the crypto underlier at a given strike price. Options are cash-settled, and we support multiple crypto-base currencies. For example, with USDC-settled options, the payoff is the difference between the strike and the USDC value of the underlier at expiration. Selling an uncovered put can result in large losses if the underlier moves in the opposite direction than expected (there are, however, strategies that option writers can use to limit risk taking, such as shorting the underlying crypto). Losses on DeVol when selling puts are capped to the option payoff associated with the lowest value of the underlier in the expected range. Importantly, the DeVol Protocol โ€œblocksโ€ the amount of the sellerโ€™s trading funds so as to ensure that the maximum potential payment under the put is covered, creating a cash-secured put.

DeVol Trading Tip: Sell a put to generate income if you expect the value of the underlier to end up above the strike price at expiration.


BTC is currently trading at BTC/USDC 40,000. You sell one BTC ATM put option with a strike of BTC/USDC 40,000 and a one-week maturity. Implied volatility is 4% over the time to expiration (one week). Given six standard deviations in a lognormal scale, the expected range for BTC at expiration is BTC/USDC 31,385 to 50,980. Assume that the option is USDC-settled. Consider the following possibilities and associated payoffs when the option expires. Note that in all scenarios, you ultimately also have to factor in the cost of the option (the premium) to determine your final profit & loss. Also, as an option seller you post collateral in the amount of 8,535 USDC at the time you sell the option, which is the maximum payment amount you could end up owing as a result of selling this option under the collateralization of the DeVol pricing AMM. After settlement, these funds are released, adjusted for the option payoff owed.

In over 99% of the outcomes, there is a small discrepancy between the DeVol settlement vs. what a traditional option would pay. As this example illustrates, this discrepancy will be relatively small and can resolve itself in the traderโ€™s favor or against. In the event of a very large, unusual decrease in BTC price that falls outside of the expected range (far in the tail), this discrepancy becomes more significant. For example, if BTC halves in a week and ends up trading at BTC/USDC 20,000, the payoff you would end up owing is capped to USDC 8,535. Why? This is because the DeVol protocol is fully collateralized, ultimately making for a safer exchange and trading experience. Settlement is based on BTC/USDC 31,385 as the minimum expected BTC price. As an option seller, your losses are therefore capped. If BTC ends up at BTC/USDC 0, the payoff you would owe would still only be USDC 8,535. Even though BTC is a volatile asset, we think an extreme event like this is as likely to happen as Dr. DeVol winning the lottery twice in a row.

Definitions & Payout

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