Hedging · Defined downside
Protective
Put
Insurance for a position you want to keep. Buy a put against your holding and you cap the downside while leaving the upside open — for the cost of the premium.
What it is
A protective put (or married put) means holding the underlying and buying a put against it. The put acts as insurance: below its strike, gains in the put offset losses in the holding, setting a floor. Above the strike, you keep the upside, minus the premium paid.
Key facts
- Market view: bullish/long but wanting downside protection.
- Construction: Hold the underlying + Buy 1 put.
- Cost: the put premium (your insurance cost).
- Max loss: limited — (entry − put strike) + premium.
- Max profit: open-ended as the underlying rises.
- Breakeven: entry price + put premium.
The put floors losses below its strike while the holding's upside stays open — for the cost of the premium.
When to use it
- You hold a position into an uncertain event and want to cap downside without selling.
- You're long-term bullish but worried about a near-term drop.
- IV is reasonable, so the insurance isn't overpriced.
Risks & trade-offs
- The premium is a drag on returns if the underlying rises or stays flat.
- Protection expires — it must be rolled to stay hedged.
- Choosing a lower strike is cheaper but leaves a bigger gap before protection kicks in.
Price your hedge live
Use TradePulse's live option chain and Greeks to choose a put strike and see your floor and cost.
Related strategies
- Collar — cap both sides to cut hedging cost.
- Long Put — directional bearish version.
- Covered Call — income on a holding.