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Bullish Patterns
Long Calls
Bull Call Spread
Bull Put Spread
Call Backspread
Long Call Ratio Spread
Naked Put
Synthetic Long Stock
The Collar
Covered Calls
Synthetic Long Call
Synthetic Short Put
Covered Straddle
Covered Strangle
Married Put
Protective Put

Bearish Patterns
Long Puts
Bear Put Spread
Bear Call Spread
Put Backspread
Long Put Ratio Spread
Naked Calls
Synthetic Short Stock
Synthetic Short Stock (split strikes)
Covered Put
Protective Call
Synthetic Short Call
Synthetic Long Put

Long Volatility
Long Straddle
Long Strangle
Short Call Butterfly
Short Put Butterfly
Short Iron Butterfly
Short Call Condor
Short Put Condor
Short Iron Condor
Long Guts
Strip
Strap
Short Call Ladder
Short Put Ladder
Long Call Synthetic Straddle
Long Put Synthetic Straddle

Short Volatility
Short Straddle
Short Strangle
Long Call Butterfly
Long Put Butterfly
Long Iron Butterfly
Long Call Condor
Long Put Condor
Long Iron Condor
Short Guts
Long Call Ladder
Long Put Ladder
Call Ratio Spread
Short Call Ratio Spread
Put Ratio Spread
Short Put Ratio Spread
Ratio Call Write
Ratio Put Write
Short Call Synthetic Straddle
Short Put Synthetic Straddle
Variable Ratio Write

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Protective Put

Risk: limited
Reward: unlimited

General Description
Entering a protective put entails buying puts on stock already owned. It's the same as a married put. Also, it has the same risk profile as a long call, so it's considered a type of synthetic long call.

(draw a protective put diagram here)

The Thinking
You own a stock and wish to remain long, but it just rallied a bunch and is due for a pullback. You buy puts to make a few bucks while the stock corrects. If the stock rallies, you keep the stock and lose the premium paid for the puts - the price of insurance. If the stocks drops, the paper loss from the stock falling with be easier to swallow because you'll make money with the long puts.

Example
XYZ is at $43, and you believe it has big upside potential - so big that you are willing to roll the dice with out-of-the-money long calls - but you'd like to lessen the loss incurred should the stock drop. You buy (3) 45 calls for $1.25 each and sell (1) 40 call for $3.50. The net debit is $0.25 (you collected $3.50 for the short call and paid $1.25 for each of the long calls).

You've been the proud owner of XYZ for many years. You want to keep the stock and continue collecting dividends, but because the entire market has started to move down, you are a little worried XYZ will do the same. The stock is currently at $50, so you buy (1) 50 put at $5.00 for an expiration date six months out.

If the stock closes above $50, the put expire worthless, and you’re out the net debit. At least you keep the stock and benefit from ownership (stock appreciation, dividends etc.)

Below $50, the loss from the stock will be countered by a gain from the long put – exactly what you wanted, to keep the stock and protect your downside.

The PL chart below graphically shows where this trade will be profitable and at a loss.