Downside Protection

Downside Protection

Generally used in connection with covered call writing, this is the cushion against loss, in case of a price decline by the underlying security, that is afforded by the written call option. Alternatively, it may be expressed in terms of the distance the stock could fall before the total position becomes a loss (an amount equal to the option premium), or it can be expressed as percentage of the current stock price.

Downside Protection

A position on a security that hedges risk such that it protects the holder from loss under most circumstances. One of the more common forms of downside protection is a covered option, in which one takes a long position on an option on a security that the investor already owns. This limits the loss that the investor could sustain on the security.

downside protection

An investment position that seeks to reduce losses resulting from the decline of a stock or a fall in the overall market. For example, put options provide downside protection against a decline in the price of the underlying stock. Likewise, writing covered call options can provide partial downside protection against price declines.
References in periodicals archive ?
An activist investor could be tempted to "make a move" and not only offer downside protection to the stock, but upside potential "well above" current levels, the analyst said.
As of August 8, 2019, downside protection was 68.2%.
While shares have come under recent pressure since June, Chico says she sees favorable risk/reward with cash offering limited downside protection, and livoletide success helping shares work towards the $24 price target.
"The portfolio is an excellent fit within our long-term strategy of acquiring properties tied to non-performing or sub-performing commercial mortgage loans with significant value-add potential, strong downside protection, and the opportunity to leverage our experience in real-estate operations and commercial-mortgage workouts," Sid Singh, managing director of Briar Meads Capital, said in a statement.
QIC said this addition to its portfolio provides clients with important geographic and sector diversification and given its strategic nature, strong downside protection through market cycles.
The investment now has full capital and downside protection to ensure that the interests of Vedanta Limited shareholdersaACAO are protected, said the Vedanta statement.
"If you have an allocation to liquid alternatives like long-short equities, you are still getting access to some of that growth, but if you see a downturn you have an element of downside protection," Chris Dawe, product manager at Schroders said.
Consistent with this approach, the Fund will focus on critical infrastructure investments with low volatility and strong downside protection where KKR believes it can leverage its global value creation resources to tackle complexity in sourcing, structuring, operations, and execution.
These proceeds exclude the additional USD 5.0 million in downside protection due from the purchaser of Stellwagen pursuant to the sale agreement.
Tan Siew Lee, head of wealth management, Singapore, OCBC Bank, said, 'This fund incorporates all three desires of our customers - quarterly fixed pay outs of at least 9 percent over three years, downside protection as long as the underlying bonds do not default, and potential capital appreciation through exposure to a multi-asset allocation across a range of bond and equity Exchange Traded Funds (ETFs).'
Dedicated to providing prudent stewardship of client assets, the firm focuses on active, fundamental and benchmark-agnostic investing, with a strong emphasis on downside protection. For more information, visit www.feim.com.
for selling "custom-designed Cyblack box' funds of hedge funds they portrayed as capable of producing the high investment returns with safe diversification while providing downside protection."