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Protective Put


  • Involves buying put options of stocks already owned or simultaneously bought
  • Motivation
    • Protection against loss in the value of stocks owned
  • Expectation
  • Rise in the price of the underlying
  • Advantage
    • Trader profits from the rise in price of the underlying albeit the amount of profit is reduced by the premium paid to purchase the put
    • In case the price of the underlying goes down, the trader is still able to sell the underlying at the strike price, thus insuring her profit

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