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| 1 |
An investor creates a covered call position by
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buying the
underlying security and selling a call option.
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| 2 |
Covered call writing strategies
are used to generate
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additional portfolio income when the investor believes that
the underlying stock price will...
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| 3 |
A protective put (also called portfolio insurance
or a hedged portfolio) is constructed by
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holding a long position in the
underlying security and buying a put option.
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| 4 |
You can use a protective put to
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limit the downside risk at the cost of the put premium, P0.
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| 5 |
The purchase of the put provides a lower limit to the position
at a cost of
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lowering the possible profit (i.e., the gain is reduced by the cost
of the insurance).
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It is an ideal strategy for an investor who thinks the
stock may go down in the near future,...
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preserve upside
potential.
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