What Is a Protective Put Strategy?

A protective put strategy is an investment strategy where an investor buys a put option for an underlying stock or asset they own. This strategy is used to hedge against potential asset value losses. Essentially, the put option serves as an insurance policy, ensuring that the investor can sell the asset at a specified price (the strike price) before a certain date, regardless of how much its market value may have dropped. This strategy is protective because it limits downside risk while allowing for potential gain if the asset’s price increases.

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