A protective put is an options strategy involving buying a put option over a stock or index one owns to protect against a potential decline in its price over a specific period. Investors use protective puts when they’re bullish on a particular asset but want to hedge against downside risk. This strategy can also be employed to generate income through selling options premiums.
Protective puts offer several benefits. Firstly, they provide downside protection against price fluctuations. Secondly, they allow investors to maintain their long positions in assets while mitigating potential losses. Additionally, protective puts can generate income through premium collection.
