PROTECTIVE PUT	COVERED PUT
About Strategy	Protective Put Option Strategy Protective Put Strategy is a hedging strategy where trader guards himself from the downside risk. This strategy is adopted when a trader is long on the underlying asset but skeptical of the downside. He will buy one ATM Put Option to hedge his position. Now, if the underlying asset moves either up or down, the trader is in a safe position. Read more..	Covered Put Option Strategy  This strategy is exactly opposite to Covered Call Strategy. Here the investor is neutral or moderately bearish in nature and wants to take advantage of the price fall in the near future. The trader will short one lot of stock future. Now the trader will short ATM Put Option, the option strike price will be his exit price. If the prices rally above the strike price, the .. Read more..

PROTECTIVE PUT Vs COVERED PUT - Details

	PROTECTIVE PUT	COVERED PUT
Market View	Bullish	Bearish
Type (CE/PE)	PE (Put Option)	PE (Put Option) + Underlying
Number Of Positions	1	2
Strategy Level	Beginners	Advance
Reward Profile	Unlimited	Limited
Risk Profile	Limited	Unlimited
Breakeven Point	Purchase Price of Underlying + Premium Paid	Futures Price + Premium Received

PROTECTIVE PUT Vs COVERED PUT - When & How to use ?

	PROTECTIVE PUT	COVERED PUT
Market View	Bullish	Bearish
When to use?	This strategy is adopted when a trader is long on the underlying asset but skeptical of the downside.	The Covered Put works well when the market is moderately Bearish.
Action	Buy 1 ATM Put	Sell Underlying Sell OTM Put Option
Breakeven Point	Purchase Price of Underlying + Premium Paid	Futures Price + Premium Received

PROTECTIVE PUT Vs COVERED PUT - Risk & Reward

	PROTECTIVE PUT	COVERED PUT
Maximum Profit Scenario	Price of Underlying - Purchase Price of Underlying - Premium Paid	The profit happens when the price of the underlying moves above strike price of Short Put.
Maximum Loss Scenario	Premium Paid + Purchase Price of Underlying - Put Strike + Commissions Paid	Price of Underlying - Sale Price of Underlying - Premium Received
Risk	Limited	Unlimited
Reward	Unlimited	Limited

PROTECTIVE PUT Vs COVERED PUT - Strategy Pros & Cons

	PROTECTIVE PUT	COVERED PUT
Similar Strategies	Long Call, Call Backspread	Bear Put Spread, Bear Call Spread
Disadvantage	• Value of protective put position decreases as time passes • Holding period of the protective put can be affected by the timing as a result tax rate on the profit or loss from the stock can be affected.	• Limited profit, unlimited risk. • Trader should have enough experience before using this strategy.
Advantages	• Unlimited potential profit due to indefinitely rise in the underlying stock price . • This strategy allows you to hold on to your stocks while insuring against losses. • Hedging strategy, trader can guard himself from the downside risk.	• Investors can book profit when underlying stock price drop, move sideways or rises by a small amount. • Able to generate monthly income. • Able to generate profit from fall in prices or mild increase in the prices.