GLOSSARY · INVESTING

Protective put

Buying a put option on shares you already own, which gives the right to sell them at a set strike price until expiration. It puts a floor under the holding at roughly the strike minus the premium paid, while keeping the upside. Like insurance, it has a cost that recurs each time it is renewed.

Also called: married put, portfolio insurance put
FORMULA
Worst-case value per share ≈ strike price − premium paid
COMPUTE IT WITH YOUR NUMBERS
Sequence of returns risk →How much does the order of returns change my outcome?
LEARN IT PROPERLY
CHAPTER · ADVANCED INVESTMENT STRATEGIES · DEEP DIVEOptions as Protection: Puts, Covered Calls and Collars
RELATED TERMS
Covered callSequence of returns risk
SOURCES
All terms →The Library →