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A protective option or married option is a financial transaction in which the holder of securities buys a type of financial options contract known as a "call" or a "put" against stock that they own or are shorting. The buyer of a protective option pays compensation, or "premium", for this transaction, which can limit losses on their stock position.
Combines protective puts with covered calls sold on same underlying stocks. Put protects downside while call premium offsets cost of buying put. Gains capped if shares called away.
A put gives its owner the right to sell the underlying stock at a minimum set price (the option's strike price) by a set date (the option's expiration date), no matter how far it falls.
Vanguard has three escalating levels of options trading permissions: Level 1: Enables traders to write covered calls, buy protective puts and write cash-secured puts. However, margin approval is ...
Another very common strategy is the protective put, in which a trader buys a stock (or holds a previously-purchased long stock position), and buys a put. This strategy acts as an insurance when investing long on the underlying stock, hedging the investor's potential losses, but also shrinking an otherwise larger profit, if just purchasing the ...
Mildly bullish trading strategies are options that make money as long as the underlying asset price does not decrease to the strike price by the option's expiration date. These strategies may provide downside protection as well. Writing out-of-the-money covered calls is a good example of such a strategy. The purchaser of the covered call is ...
Options trading allows investors to limit their risk and leverage their capital, but it can also expose them to amplified losses. It's one of the most flexible trading styles because of the many...
The married put (also known as a protective put) is a bullish strategy and consists of the purchase of a long stock and a long put option. The married put has limited downside risk provided by the purchased put option and a potential return which is infinite. Calculations for the Married Put Strategy are: Net Debit = Stock Price + Put Ask Price