Enhancing the transmission rate for a better spectral utilization is always the ultimate goal of any wireless network. In this paper, we consider the problem of optimal power and rate allocation to maximize the transmission rate of a cognitive radio (CR) operating in the spectrum sharing (SS) CR network (CRN). Unlike previous literature that takes into account the amount of interference to the primary system (PS) as the protection criterion, we reconsider the protection to the PS and CRs through different levels of protection in signal-to-interference-plus-noise ratio (SINR). We propose the concept of effective signal coverage called the permissible space for optimal power and rate adaption. The permissible space for a cognitive transmitter spans over a 3-D space, and it varies according to the channel statistics. Through detecting to which permissible space the cognitive receiver belongs, a novel algorithm suited for distributed CR operation is proposed. Numerical results confirm that our algorithm implemented in the SS CRN achieves a significant enhancement in sum rate, as compared with that of an opportunistic spectrum access (OSA) CRN.