Protective Put
Buy a put on stock you own to insure against a sharp price decline.
Definition
A protective put (also called a married put) is a hedging strategy in which you hold the underlying stock and buy a put option on it. The put gives you the right to sell the shares at the strike price, so it acts like an insurance policy that limits how much you can lose if the stock falls. You keep all the upside of owning the stock, minus the premium you pay for the put.
Why it matters
It lets long-term holders ride out volatile periods or events such as results without being forced to sell. Your downside below the strike is capped, while your upside stays open. The cost is the premium, which slightly reduces returns in a flat or rising market — the price you pay for protection. It is the mirror image of a covered call: one caps the downside, the other caps the upside.
Example
You own a stock trading at 500 and buy the 480 put for a premium of 10. If the stock crashes to 420, your shares lose 80 but the put gains roughly 60, cushioning the fall — your loss is limited to about the 20 gap plus the 10 premium. If the stock rises, you simply lose the 10 premium and keep the gains.
See it live
Use the TradePulse option chain to compare live put premiums and choose a strike for your hedge.