The Benefits of Put Strategies
Put strategies are valuable for investors because it allows the owner to sell to sell the underlying asset at least 100 shares
. The owner can sell at the strike price before the given expiration date. One type of put strategies is the protective put strategy wherein the investor who buys put options can also hold shares from previous purchases. This strategy is employed especially when the investor does not accrue any profit from the previous shares. On the other hand, this is a directional strategy wherein an investor is concern about the risks in the downside market in the future and wants to protect the gains that he might obtain in the share value. Benefit of Put Strategies An investor who uses protective put strategy enjoys the benefits of continuing the stock ownership including the dividends, voting rights and many others until the put contract expires. The investor has the right to sell the shares even if the value of the underlying stock decreases. Moreover, the put owner has the right to react in times when the market price suddenly decreases. In addition, when you purchase protective put you should consider several factors such as the volatility of the underlying stock as well as the expiration date. Protective put strategies are beneficial when the stocks are bullish. This is a preventive measure before something goes wrong. Likewise, this strategy allows you to stay in the market when there is a downside risk while the investor has high risk perception. In this case, you should be careful in your investment decision in order to obtain best result of put option. When using put strategies you need to be smart in making decisions to keep your stocks from falling. The strategy would help to cover your losses whenever the stock went up or you did not obtain profit from your sales. Another benefit that this strategy provides is the guaranteed selling price. It lets you know how to sell your shares in whatever price that prevails in the market. However, the strategy has nothing to do in determining the highest price in selling your share. This would make you enjoy the unlimited potential profit when the price of the underlying stock continues to improve. The Bottom Line Due to the market volatility, many investors are finding ways to reduce the down side risk as well as to stop losses. One of the ways ideal is to utilize put strategies that can provide you the level of comfort that you need and to make your stocks secured. This strategy is more conservative as compared to simple stock purchase in a sense that the put is held against underlying stock position. Moreover, it is also important to pay for premium to cover the protective put as well as its benefits. This makes an equal break-even point necessary for the underlying shares. In case that the owner of the put realize that it is not anymore needed, he can decide to sell the put according to its market value.The Benefits of Put Strategies
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