Protective put buying strategy

Similar financial terms

Protective covenant
A part of the indenture or loan agreement that limits certain actions a company takes during the term of the loan to protect the lender's interests.

Put provision on bonds
A put provision grants the bondholder the right to sell the issue back to the issuer at par value on designated dates. Here the advantage to the investor is that if interest rates rise after the issue date, thereby reducing a bond’s price, the investor can force the issuer to redeem the bond at par value.

Uncovered put
A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. Also called "naked" puts, the writer has pledged to buy the stock at a certain price if the buyer of the options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited.

Transferable put right
An option issued by the firm to its shareholders to sell the firm one share of its common stock at a fixed price (the strike price) within a stated period (the time to maturity). The put right is "transferable" because it can be traded in the capital markets.

Throughput agreement
An agreement to put a specified amount of product per period through a particular facility. For example, an agreement to ship a specified amount of crude oil per period through a particular pipeline.

Put-call parity relationship
The relationship between the price of a put and the price of a call on the same underlying security with the same expiration date, which prevents arbitrage opportunities. Holding the stock and buying a put will deliver the exact payoff as buying one call and investing the present value (PV) of the exercise price. The call value equals C=S+P-PV(k).

Put swaption
A financial tool in which the buyer has the right, or option, to enter into a swap as a floatingrate payer. The writer of the swaption therefore becomes the floating-rate receiver/fixed-rate payer.

Put provision
Gives the holder of a floating-rate bond the right to redeem his note at par on the coupon payment date.

Put price
The price at which the asset will be sold if a put option is exercised. Also called the strike or exercise price of a put option.

Put option
This security gives investors the right to sell (or put) fixed number of shares at a fixed price within a given time frame. An investor, for example, might wish to have the right to sell shares of a stock at a certain price by a certain time in order to protect, or hedge, an existing investment.

Put bond
A bond that the holder may choose either to exchange for par value at some date or to extend for a given number of years.

Put an option
To exercise a put option.

Put
An option granting the right to sell the underlying futures contract. Opposite of a call.

Poison put
A covenant allowing the bondholder to demand repayment in the event of a hostile merger.

Computer-Intergrated Manufacturing (CIM)
The intergration of computer control and monitoring into a manufacturing process.

Covered Put
A put option position in which the option writer also is short the corresponding stock or has deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the option writer's risk because money or stock is already set aside. In the event that the holder of the put option decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put option.

Buying the index
Purchasing the stocks in the S&P 500 in the same proportion as the index to achieve the same return.

Active portfolio strategy
A strategy that uses available information and forecasting techniques to seek a better performance than a portfolio that is simply diversified broadly. Related: passive portfolio strategy.

Structured portfolio strategy
A strategy in which a portfolio is designed to achieve the performance of some predetermined liabilities that must be paid out in the future.

Stock replacement strategy
A strategy for enhancing a portfolio's return, employed when the futures contract is expensive based on its theoretical price, involving a swap between the futures, treasury bills portfolio and a stock portfolio.

Spread strategy
Spreading is a strategy that involves a position in one or more options so that the cost of buying an option is funded entirely or in part by selling another option in the same underlying.

Randomized strategy
A strategy of introducing into the decision-making process a random element that is designed to reduce the information content of the decision-maker's observed choices.

Passive portfolio strategy
A strategy that involves minimal expectational input, and instead relies on diversification to match the performance of some market index. A passive strategy assumes that the marketplace will reflect all available information in the price paid for securities, and therefore, does not attempt to find mispriced securities.

Pac-Man strategy
Takeover defense strategy in which the prospective acquiree retaliates against the acquirer's tender offer by launching its own tender offer for the other firm.

Overlay strategy
A strategy of using futures for asset allocation by pension sponsors to avoid disrupting the activities of money managers.

Ladder strategy
A bond portfolio strategy in which the portfolio is constructed to have approximately equal amounts invested in every maturity within a given range.

Exit strategy
Refers to the way in which investors and founders can "exit", i.e. leave their company, with a cash return on their investment - e.g. by going public or being acquired or being bought out by other shareholders.

Barbell strategy
A strategy in which the maturities of the securities included in the portfolio are concentrated at two extremes.

Bullet strategy
A strategy in which a portfolio is constructed so that the maturities of its securities are highly concentrated at one point on the yield curve.

Buy-and-hold strategy
A passive investment strategy with no active buying and selling of stocks from the time the portfolio is created until the end of the investment horizon.

Combination strategy
A strategy in which a put and with the same strike price and expiration are either both bought or both sold.

Covered call writing strategy
A strategy that involves writing a call option on securities that the investor owns in his or her portfolio. See covered or hedge option strategies.