It is possible to view the existence of social welfare programs from the employee's perspective as a protective put
In making this adjustment, the marketability equivalence put option becomes a protective put
option (David Chafee, "Option Pricing as a Proxy for Discount for Lack of Marketability in Private Company Valuations," Business Valuation Review, December 1993, http://bit.ly/2DrbLeP; John D.
: 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.
A protective put
is the simultaneous purchase of a stock and a corresponding put option or the purchase of a put related to a stock the investor already owns.
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.
While risk management concepts may be automatically embedded in any presentation of the subject (e.g., derivatives can be used as hedging instruments, or protective puts
are essentially insurance on the value of a portfolio), this book is more directly an exposition on derivatives.