In this article, we will be taking a look at the Protective Put strategy that you can use to protect your bullish (long) position on a particular stock using a put option. Previously, the covered call strategy was written here.
Who is it for?
- Investors who are bullish on a particular stock
- At the same time, the investor would like to “buy” insurance to protect against potential downside.
How does it work?
Let’s take a look at our hypothetical character, Jon. Jon is looking at the Netflix chart and thinking if there are any opportunities to purchase some shares.
As he analyses Netflix (NFLX), he realizes that it is on a strong support area around the 600 region.
There’s an ascending support line.
There’s also a strong overlap support area.
With this bias in mind, he then