After the market closed on Tuesday, August 12, $Circle Internet Corp.(CRCL)$ fell 7.48% to $149.12, drawing market attention. Many investors bought Protective Puts to safeguard gains.
The Buy Protective Put strategy is an excellent high-level defense strategy — but what are the must-know considerations before using it? 🤔
📘 No worries — The Options Handbook has summed them all up for you:
▶ Quick look back: What Is a Buy Protective Put?
A Buy Protective Put is simply buying a put option while holding the stock.
If the price falls, you can sell at a higher strike to limit losses; if it doesn’t, the cost is just the premium for peace of mind.
▶ Cost Considerations 💰
Protective Puts can be expensive — high premiums may erode long-term returns. To lower costs, consider advanced strategies like a Put Spread.
▶ Watch the Implied Volatility (IV) 📊
If IV is high, puts get pricey. If IV drops after you buy, your option may lose value, even if the stock doesn't move.
▶ Monitor Time Decay ⏳
Every day that passes without a drop hurts the value of your put. That's why timing matters.
▶ Exiting Smart 📅
If the stock drops and your put gains value, you can close the trade to lock in the gain. Don't wait for expiry just because it's on the calendar.
▶ Bottom Line
Protective puts aren't free, but they can be worth it, especially when you want to stay in the game without leaving yourself wide open.
Use them thoughtfully, watch the costs, and remember: sometimes, a little protection goes a long way.
✨ More on Put Spreads and real-world case studies can be found in The Options Handbook — now available in the Tiger Coin Center!
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