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The market crashed and all five of my puts are in trouble

A market-wide drop has pushed every one of your puts below its strike at the same time. That's not bad luck with five stocks; it's what stocks do together in a crash. Here's the damage in numbers, your choices today, and the rule that keeps the next one smaller.

Options guide · 9-minute read · Updated 2026-10-27

What's happening in your account right now

You sold five cash-secured puts on five different companies. You picked different businesses on purpose, to spread the risk. Then the whole market fell hard in a few days. Now every put shows a loss, and all five could be assigned at once.

Your broker screen is a wall of red. The buy-back price on each put is far above what you collected. You may be wondering whether to close everything before it gets worse.

First, a breath. If every put is cash-secured, nothing will be sold for you, and nobody can force a decision today. You have time to think. If any put is on margin, read I used margin to sell puts first, because that clock is real.

The damage, position by position (an illustration, not a trade idea)

Your account holds $30,000 in cash. A month ago, five made-up stocks each traded near $55. You sold one 30-day $50 put on each, for $1.50 apiece. You collected $750 and committed $25,000, most of the account.

The market drops. By expiry, here's where each stock sits:

A $30,000 account is now worth about $24,850. That's a drawdown of about 17%, in a single month, from a strategy that felt careful.

All five are assigned. You spend $25,000 and own 500 shares across five stocks, worth $19,100.

Why five stocks moved like one

Five different companies sound like five separate bets. On a normal day, they are. Each moves on its own news.

In a crash, that changes. Investors sell almost everything at once, so stocks that usually move apart start moving together. A drug maker, a bank and a software company can all fall 25% in the same week, for the same reason: fear.

That's the hard truth about the wheel strategy in a crash. Diversifying across stocks guards against one company. Only the amount of cash committed guards against the market.

Your choices now

None of these is a "fix." Each one is a way to manage a loss that's already happened.

1. Take assignment and hold. You planned to own these at $50. If the businesses are still ones you'd own, holding and selling covered calls later is the normal path. Watch out for the strike-below-cost trap when you sell those calls.
2. Close the weakest before expiry. If one company's own news is bad, not just the market's, you can buy that put back. On stock C, with a few days left and the stock at $35, that might cost about $15.20: a locked-in loss of about −$1,370 instead of owning the shares.
3. Roll some for a credit. Rolling to a later date at the same or a lower strike can buy time. It doesn't remove the loss; see I rolled three times and I'm still losing before you lean on it.
4. Don't sell new puts to "make it back." More puts during a crash add risk at exactly the wrong time. Let the existing positions settle first.

Whatever you choose, use limit orders. Spreads are wide in fast markets.

The cap that would have limited it

Say you'd had one rule: never commit more than half the account to open puts. On $30,000, that's $15,000, which fits three of these puts, not five.

Same crash, three puts (say A, D and E):

The cap didn't stop the crash. It cut the damage nearly in half and left real cash to work with. That free cash is what lets you hold through the drop calmly instead of being cornered by it.

The rule for next time

Before adding any new put, run a simple stress test:

1. Assume every stock you hold a put on falls 30% tomorrow. All at once.
2. Work out the loss on each. For our puts, a 30% fall from $55 is $38.50: about −$1,150 on the shares plus $150 of premium, or −$1,000 each.
3. Add them up. Five puts: about −$5,000.
4. Ask if you could live with that number. If not, the total is too big, however different the stocks are.

Then set three caps and write them down:

• A cap on total cash committed to puts.
• A cap per stock.
• A cap per sector, since stocks in one industry fall together even on normal bad days.

Our position sizing for selling options guide covers each one. If you're also running too many contracts on one name, see I sold too many contracts.

In Canada, cash-secured puts in a TFSA or RRSP behave the same way in a crash, where the broker allows them. Covered calls are widely allowed; options permissions differ by broker.

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