protective put


Also found in: Wikipedia.

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 ?
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.
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.
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.
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.
As for the directional put-call ratio, the rabid buying of protective puts was snuffed out as the investors' fears calmed with time producing no major reversals from the Dow 30 and other indexes.
What's more, risk reversals for the proxy carry pair (USDJPY) show traders are once again paying a higher premium for directional calls and less for protective puts - an indication of risk and direction.

Full browser ?