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Protective Puts Profile Version / Simplified Version / Comprehensive Version
Protective Put Discussion Protective Put Discussion   |   Find Similar Risk Profiles Find Similar Risk Profiles



Purpose of Protective Puts

1. To protect a portfolio of stocks from decline in account value


Expectations of Protective Puts

Bullish


Type of Spread

Debit Spread


How To Use Protective Puts

Buy to open 1 contract of at the money put options for every 100 shares that you own.

Buy ATM Put 		Protective Put Risk Graph Learn How To Read This Chart


Profit Potential of Protective Puts :
Protective Puts is an option trading hedging strategy which, combined with the underlying stock, grants unlimited maximum profit as long as the underlying stock continues to rise.

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Profit Calculation of Protective Puts :

Profit = (stock price - put strike price - cost of put) x number of shares


Risk / Reward of Protective Puts:

Upside Maximum Profit: Unlimited

Maximum Loss: Limited


Break Even Point of Protective Puts:

Breakeven = Initial stock price + cost of put options bought.


Advantages Of Protective Puts:

  • Allows you to hold on to your stocks while insuring against any losses.


    Disadvantages Of Protective Puts:

  • Cost of the put options eats into profit margin.


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