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 ?
The investment offers a mix of elements that correspond with Platinum Equity's M and A and O strategy, which emphasises entry price, downside protection and operational excellence to create value.
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.
FP III has a compelling control-oriented investment strategy targeting consistent income and downside protection with equity-like upside that was in high demand from Institutional investors, said Peter Martenson, Partner at Eaton Partners.
Oman Insurance Company has also partnered with Commerzbank, a leading international commercial bank with branches and offices in almost 50 countries, which provides a downside protection facility which ensures that, anytime of the policy term, the unit price of the investment will always be at least 80 per cent of the highest historical unit price.
Due to its inherent downside protection and long term value potential, we continue to see an increased appetite for properties encumbered by restrictive agreements," said Sozio.
6 billion in assets, it is now offering institutional investors a range of solutions delivering portfolios that aim to experience lower volatility than the market, can have an element of downside protection and can have downside protection automatically move up when markets rise.
Diversifying with assets that provide uncorrelated market exposure is the mainstay of most investment managers, in terms of attempting to reduce risk but a more modern approach is to also include certain investments that provide simple, downside protection.
The combination of upside potential and downside protection is attractive to buyers,' said David Rosuck, vice president of marketing communications for the Life Insurance Division of Pacific Life Insurance Company.
On the other hand, for the "40" in a standard portfolio, investment-grade debt (particularly Treasuries) is a true diversifier, and can provide downside protection.
These are the only offerings on the market that can provide tax-deferred retirement savings, upside growth with downside protection, and guaranteed income throughout one's lifetime.
The CEO of Al Meezan Investments, Mohammad Shoaib, CFA, while announcing the launch of the plan said "As more and more investors are looking to capture upside of the stock market and the same time want downside protection, Al Meezan has continued to launch capital preservation funds and plans.
They tout the product as one with unlimited upside potential and guaranteed downside protection.