Who Should Consider Using Protective Puts?
• An investor who currently holds a stock, but does not want to sell because he believes the stock may rise in value. This investor would like to be able to participate in the rise without risking all of his profit (if any). • An investor who is considering purchasing a stock but is concerned with downside risk. Today, investors are often concerned with the many uncertainties of the stock market. During bull markets, investors are worried about market corrections, and during bear markets, they are worried that their stocks could fall further. This uncertainty can lead to a reluctance to invest, and strong up moves might be missed. Buying puts against an existing stock position or simultaneously purchasing stock and puts can supply the insurance needed to overcome the uncertainty of the marketplace. People insure their valuable assets, but most investors have not realized that many of their stock positions also can be insured. That is exactly what a protective put does. Typically, by pa
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