protective put

protective put

A put option owned in conjunction with the corresponding stock. A protective put guarantees the holder will receive at minimum proceeds that equal the exercise price of the put. For example, an investor could hold 100 shares of Coca-Cola while also holding a put on Coca-Cola stock. The protective put shelters the investor in case the stock's price declines in the market. Also called married put.
References in periodicals archive ?
When volatility is low the portfolio manager uses protective put options to manage downside risk.
Protective Put: A protective put is simply a long put that is combined with the underlying asset.
Buying protective put options provides a way to absolutely limit your downside risk on a stock for the length of the contract in exchange for payment of an up-front cash premium.
With the protective put option, the market price of the put is similar to the premium on a traditional insurance policy.
Moreover, many brokerage firms failed to explain how the use of risk management strategies, like a zero-cost collar, protective put options, stop loss orders and/or an exchange fund, could have protected the concentrated UPS position.
Protective put writing increases cost bases on underlying securities held.
Unfortunately, despite having a duty to do so, MSSB failed to protect the concentrated Lloyds stock position through the use of available risk management strategies, like a collar, protective put options, stop loss orders and/or an exchange fund.
Unfortunately, despite having a duty to do so, Merrill Lynch failed to protect the concentrated Weyerhaeuser stock position through the use of available risk management strategies, like a collar, protective put options, stop loss orders and/or an exchange fund.
The demand for protective puts has also been turned higher - though volatility here is masking the general trend towards safe guarding positions.
In a series of 73 brief and completely updated essays Chance gets both beginners and veterans through definitions of derivatives and their markets (including a brief history), basic instruments (including swaps and interest rate derivatives), derivative pricing (including forward and futures pricing and option pricing), derivative strategies (including protective puts and hedge funds), exotic instruments (including a range of options), fixed income securities and derivatives, and related topics such as stock options, stock as an option, the credit risk of derivatives, risk management, and best and worst practices.
To protect themselves, investors are buying protective puts on Tyson Foods shares.
With dividend stocks, I prefer to hold them during both good and bad times and protect them by hedging such as with protective puts.

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