Bullish, with insurance
Protective Put
Own the stock, cap the downside.
Hold your shares and buy a put as insurance. If the stock falls, the put gains and limits your loss below the strike; if it rises, you keep the upside (minus the premium paid). It's literally buying insurance on a position you want to hold — peace of mind for a cost.
Construction
Own 100 shares + buy 1 put.
Max profit
Large (the stock keeps rising)
Max loss
Limited to the fall to the strike + premium paid
Breakeven
Stock cost + premium
Play with the payoff
Bullish, with insurance
At expiryToday (30d, 30% IV)
Max profit
Unlimited
Max loss
−$5.00
Breakeven
$105.00
Best when
- You want to hold a stock but fear a near-term drop
- You'll pay a premium for defined downside
- You're protecting gains without selling