Protective Put
A protective put is an options strategy that involves buying a put option to protect a long position in the underlying stock. The strategy is used to hedge against a potential decline in the stock price. The protective put strategy is a form of insurance that can be used to protect against losses in the underlying stock. The strategy involves buying a put option with a strike price that is lower than the current price of the stock. If the stock price declines, the put option will increase in value, offsetting the losses in the stock.
History of Protective Put
The protective put strategy has been around since the early days of options trading. It was first used by traders in the late 19th century to protect their investments from market volatility. The strategy has since become a popular way to hedge against losses in the stock market. The strategy is often used by investors who are looking to protect their long positions in stocks.
Comparison Table
| Strategy | Risk | Reward |
|---|---|---|
| Protective Put | Low | Low |
| Long Call | High | High |
| Long Put | High | Low |
Summary
The protective put strategy is a popular way to hedge against losses in the stock market. The strategy involves buying a put option with a strike price that is lower than the current price of the stock. If the stock price declines, the put option will increase in value, offsetting the losses in the stock. For more information on the protective put strategy, investors can visit websites such as Investopedia and The Options Industry Council.
See Also
- Long Call
- Long Put
- Covered Call
- Collar
- Married Put
- Straddle
- Strangle
- Bull Call Spread
- Bear Put Spread
- Butterfly Spread
