Protective Put

This strategy consists of buying a Put in order to offset any decrease in value from an existing or new long position in the underlying. By buying a protective put your objective is to retain the profit potential of the long position in the underlying while protecting yourself if the value of the underlying were to decrease. Buying the Put allows to sell a determined number of shares (normally, but not always, 100) at a determined price (strike) before (in some cases only at) a set date (expiration day - normally on the Friday following the third Thursday of the month).

How to enter a Protective Put

At TradeKing you can easily simultaneously enter a Protective Put and a stock order (married put) from one screen. The order consists of two "legs", and, consequently, two orders subject to two $4.95 ticket charges.

You can enter a Covered Call order directly from the Covered Call screen or by choosing your strategy from the spread chain under "Option Chains":