Skip to content

Protective Put

July 16, 2012

Long on the underlying plus buying a put from the market.

This strategy is immediately out of pocket the option premium. But their downside risk is limited to the difference between the strike price and present value of the underlying. Upside potential is unlimited but to profit by this strategy the underlying must increase by more than the option premium.

Advertisements

From → Asset Valuation

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: