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RookiesBullish (as insurance)
Protective Put
Overview
Also known as a 'married put', this strategy provides insurance for your stock position by buying a put option. The put gives you the right to sell your shares at the strike price, creating a price floor. You pay a premium for this protection.
Max Profit
Unlimited upside minus put premium paid
Max Loss
Limited to: Stock Price - Strike Price + Premium Paid
Breakeven
Stock purchase price + Premium paid
Structure
Long 100 shares + Long 1 Put
Risk Profile
Unlimited profit potential, limited risk below strike price. Cost is the put premium.
When to Use
When you own stock and want to protect against downside risk. When you're bullish long-term but concerned about near-term volatility. Think of it as paying an insurance premium.