Protective Put Strategy: Portfolio Insurance Guide 2026

What Is a Protective Put?

A protective put (also called a married put) is an options strategy where you buy a put option on a stock you currently own. The put gives you the right to sell your shares at the strike price regardless of how far the stock falls, effectively creating a price floor on your position.

You still benefit from unlimited upside — if the stock rises, you profit on the shares and the put simply expires worthless. The cost of this insurance is the premium you pay for the put option.

This is one of the most straightforward options strategies and an excellent starting point for investors who want to protect concentrated positions or hedge ahead of uncertain events like earnings, elections, or macroeconomic announcements.

Example: You own 100 shares of NVDA at $150. The stock has run up and you're worried about a pullback but don't want to sell. You buy a $140 put expiring in 60 days for $5.00. Cost: $500. If NVDA drops to $110, you can exercise your put and sell at $140 — your max loss is ($150 - $140) + $5 premium = $15/share ($1,500) instead of $40/share ($4,000). If NVDA rises to $180, you gain $30/share on the stock minus the $5 put premium = $25/share net profit.

When to Use It

• When you have a large unrealized gain you want to protect
• Ahead of earnings or major events when you want to hold through uncertainty
• When you have a concentrated position that represents a big portion of your portfolio
• During periods of elevated market risk (recession fears, geopolitical tension)
• When you want to keep holding for long-term capital gains tax treatment but need downside protection

How to Set It Up

1. Identify the stock position you want to protect 2. Choose your strike price — this is your "floor" price. Common choices: - ATM put (maximum protection, highest cost) - 5-10% OTM put (cheaper, still protects against big drops) 3. Select expiration: match it to your risk window (60-90 days is common) 4. Buy 1 put contract per 100 shares owned 5. Factor the premium cost into your expected return

Risk & Reward

Max profit: Unlimited (stock can rise indefinitely, minus the put premium paid) | Max loss: (Stock price - Strike price) + Premium paid. In the example: $15/share ($1,500 total) | Breakeven: Current stock price + premium paid. In the example: $155 (you need NVDA above $155 to profit after the insurance cost).

Best Brokers for This Strategy

Tastytrade offers free-to-close pricing, which is helpful if you want to close the put early when the risk event passes. IBKR has the lowest commissions for large positions and the best fills on protective puts for high-priced stocks. thinkorswim/Schwab provides excellent risk graphing to visualize your protected position. See our IBKR review.

Not financial advice. Always do your own research.