Buying a is essentially like buying an insurance policy for your stocks. It gives you the right to sell a specific stock at a predetermined price (the strike price ) before a certain date, regardless of how far the actual market price falls. 1. Downside Price Risk

If you'd like to see how this works with a specific example, let me know: The you're looking at The current price How much of a drop you are trying to protect against

The put increases in value (or allows the sale at the strike), offsetting the losses on your actual shares.

The put expires worthless, and the premium you paid is the cost of your "peace of mind."

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