Protective Put Strategy

Bullish with ProtectionBeginnerInsurance Strategy

Own stock and buy puts for downside protection while maintaining unlimited upside potential.

Protective Put Calculator

Position Metrics

$153.00
Breakeven
$145.00
Protection Level
$800.00
Max Loss
$$-300.00
Current P&L
$300.00
Insurance Cost
3.3%
Protection %
$0.00
Put Value

Protective Put Profit/Loss Diagram

Protective Put P&L

Current: $150Breakeven: $153.00Strike: $145$75$94$113$131$150$169$188$206$225$-960$1080$3120$5160$7200Stock Price at Expiration ($)Profit/Loss ($)
P&L Curve
Current Price
Breakeven
Protection Level
Initial Price

Strategy Overview

Type:Stock + Options
Outlook:Bullish with Protection
Risk/Reward:Limited Risk, Unlimited Reward
Complexity:Beginner

Description

A Protective Put involves owning 100 shares of stock and buying a put option as insurance against potential price declines. This limits downside while maintaining upside potential.

Setup

Own 100 Shares of Stock
Strikes: Current market price
Expiration: N/A
Buy Put Option
Strikes: At or out of the money
Expiration: 30-90 days typically

When to Use

  • •You own stock and want downside protection
  • •You are bullish but nervous about volatility
  • •You want to maintain upside exposure
  • •You need risk management for existing positions

Advantages

  • +Limits potential losses to a predetermined level
  • +Maintains unlimited profit potential
  • +Acts as insurance for stock holdings
  • +Simple two-leg strategy

Disadvantages

  • -Reduces net profit by premium cost
  • -Time decay works against the put option
  • -May expire worthless if stock rises
  • -Requires premium payment upfront

How It Works

1

Own Stock: Purchase or already own 100 shares of the underlying stock.

2

Buy Put: Purchase a put option to establish floor price for your shares.

3

Protection Active: Put provides insurance - you can sell at strike if stock falls below it.

Key Metrics

Max Profit:Unlimited (stock price can rise indefinitely)
Max Loss:Stock Price - Strike Price + Premium Paid
Breakeven:Initial Stock Price + Premium Paid
Protection Level:Put Strike Price
Insurance Cost:Put Premium Paid