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What is a protective put, in plain words?

A protective put is buying a put on shares you own, which insures their value, for a premium 1. The most it can lose is the share price minus the strike plus the premium, and its break-even is the share price plus the premium 1.

100 shares bought at $50, and a $48 put with 30 days left bought to protect them at 30% implied volatility (made-up numbers). Move where the stock ends at expiry.

Source: the StrikePath engine, pricing with the Black–Scholes formula 2 at 4.3% interest a year; a simulated example, not market prices. For learning; not advice.

The floor and its price

The put above costs $0.81 a share by the formula 2, $81 a contract. So the most this can lose by expiry is $50 − $48 + $0.81 = $2.81 a share, and it comes out ahead above $50.81 1. Above the strike the shares keep their rise, less what the put cost; in theory the gain has no limit 1.

Time is against the buyer

All else equal, passing time works against a protective put, as the put bought loses time value 1.

What this shows, and what it doesn't

The result at expiry, a share, before fees and the bid-ask spread. The put is a right only until its expiry date 3; after that the shares are unprotected again.

Go further

What is a put option? →Insurance against a fall.What is a covered call? →Selling a call against your shares.
Sources (3), checked 20 October 2026 and 27 October 2026
  1. The Options Industry Council, “Protective Put (Married Put)”. Read it (read 27 October 2026)
  2. Fischer Black and Myron Scholes, “The Pricing of Options and Corporate Liabilities”, Journal of Political Economy 81(3), 637–654, 1973. Read it (read 20 October 2026)
  3. US Securities and Exchange Commission, Investor.gov, “An Introduction to Options” (investor bulletin, updated 16 July 2026). Read it (read 20 October 2026)

Now try it on a scenario of your own

Pick where a simulated stock might be, and by when: drag one dot and see, side by side, what buying shares, one option, or a pair of options (a call or put spread) would each do. Free, no sign-up.

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