Protective Put Options
COURSE
Protective Put Options
Learn how to protect your portfolio against losses using long put options rather than stop losses.
As much as we wish it weren’t true, there is no such thing as a risk-free investment in the stock market. Sure, some stocks are typically less volatile than others, but none of them is risk-free. So what are you to do as an individual investor to reduce your risk? One way you can reduce your risk is to buy protective puts. In this course, we’ll show you how you can use these options contracts to decrease your downside risk.
In this course, you will learn:
- How protective puts offset losses in a long underlying stock or ETF position
- Which strike price and expiration date works best for your protective put strategy
- The costs (and opportunity costs) of a protective put trade
Once you have completed this course you will:
- Know how to select the right put option for the protection you need
- Understand how to execute a long protective put trade in your account
More Information
| Difficulty Level: | Intermediate |
| Modules: | 4 |
| Lessons: | 16 |
Course Syllabus
Protective Put Options
| Module 1 | An Introduction to Protective Puts | |
|---|---|---|
| Think of a protective put as an insurance policy. When you buy auto insurance, for instance, you pay a premium in return for protection, just in case you get in an accident or your car gets damaged. Similarly, when you buy a protective put, you pay a premium in return for protection, just in case your stock loses value. | ||
| Lesson 1 | Reading: An Introduction to Protective Puts | |
| Lesson 2 | Video: Introduction To Protective Puts (4:52) | |
| Lesson 3 | Quiz: Protective Puts | |
| Lesson 4 | Assignment: Choose and Analyze a Protective Put Option | |
| Module 2 | Choose a Strike Price for a Protective Put | |
| The first thing you need to do when buying a protective put is determine which strike price you would like to buy. Making this determination will affect how much downside risk you will be exposed to in the trade and how much you will have to pay for the protective put. | ||
| Lesson 1 | Reading: Choosing a Strike Price for a Protective Put | |
| Lesson 2 | Video: Protective Put Strike Prices (6:08) | |
| Lesson 3 | Quiz: Choosing a Strike Price | |
| Lesson 4 | Assignment: Choose and Analyze a Strike Price for a Protective Put | |
| Module 3 | Choose an Expiration Date for a Protective Put | |
| Once you have determined which strike price you would like to buy when creating your protective put, you next need to decide which expiration date to buy. Making this determination will affect how much you have to pay to protect your long stock position and how long that protection is going to last. | ||
| Lesson 1 | Reading: Choose an Expiration Date | |
| Lesson 2 | Video: Protective Put Expiration Dates (6:11) | |
| Lesson 3 | Quiz: Choosing an Expiration Date | |
| Lesson 4 | Assignment: Choose and Analyze a Protective Put Expiration Date | |
| Module 4 | Execute a Protective Put Trade | |
| Now that you have a good understanding of the basics of how protective puts work and how to select an effective strike price and expiration date for a protective put, it is time to learn how to execute the trade. | ||
| Lesson 1 | Reading: Executing a Protective Put Trade | |
| Lesson 2 | Video: Entering a Protective Put (3:41) | |
| Lesson 3 | Quiz: Executing Protective Put Trades | |
| Lesson 4 | Assignment: Paper Trade a Protective Put | |