Married put is a very commonly used hedging tool. It is helpful in protecting the value of one’s portfolio. It is also termed as protective put. A put option gives the seller to sell the security in question anytime before the maturity date. In married put, an investor opts for adequate put options to cover the value of stocks which he has purchased. If due to some reasons, the stocks don’t perform as expected, he will have the privilege of selling them at predetermined price.
Helps to Avoid Loss
An investor has the scope of earning unlimited profit by way of investing in shares. To limit the loss he may incur, he may choose to opt for a married put option in lieu of a small amount called premium. He will retain the scope for profit, earn dividends, etc and will also be able to limit the loss by availing the married put option.
It is termed as married put as the put option is opted at the very time the stocks are purchased. They are regularly availed by investors with low risk appetite and give such investors the assurance that their investments are safe in the long run. They are availed by various insurance companies as well.