Economics Options And Futures Questions
The concept of a protective put strategy in options trading involves purchasing a put option on a particular asset to protect against potential losses. This strategy is typically used by investors who already own the underlying asset and want to safeguard their investment in case the asset's price declines. By buying a put option, the investor has the right to sell the asset at a predetermined price (strike price) within a specified time period (expiration date). If the asset's price falls below the strike price, the put option provides a form of insurance, allowing the investor to sell the asset at a higher price and limit their losses.