Married Put
The simultaneous purchase of stock and the comparing number of put options. This strategy limits risk since, in such a case that the stock arrives at the puts' strike price the stock can be sold to cover the position.
Features
- Long-term investors likely don't require married puts since they ought not be worried about short-term price vacillations.
- A married put options strategy shields an investor from an extraordinary drop in the price of the underlying stock.
- The strategy could function admirably for low-volatility stocks where investors are stressed over a surprise announcement that could influence the stock price negatively.
- The cost of the option can make this strategy restrictively costly whenever utilized frequently.
- Put options shift in price, contingent upon the volatility of the underlying stock, the strike price compared to the stock price, and the time until expiration.
FAQ
Who Uses Married Puts?
Married puts can be utilized by short-term traders or investors who accept that an asset's price will rise and yet need to safeguard against startling, close term losses. Married puts aren't typically utilized by individuals investing for the long term who couldn't care less about short-term market abnormalities.
What's a Married Put Option?
A married put option is a put option purchased simultaneously an investor purchases the underlying asset. It's otherwise called a protective put option.
How Does a Married Put Help Investors?
A married put gives a hedge against loss. Basically, possessing the real stock and claiming a put option means that an investor has inverse positions simultaneously in a similar stock. Thus, assuming the stock price goes down, the trader will lose money from one perspective however gain money on the other. Thus, a loss can be unquestionably somewhat offset. In addition, while the loss potential is limited, the upside price capability of the stock is unlimited.
