What is the protective?

Protective PUT is a policy that allows investors to protect against loss regardless of how the value of the financial vehicle changes. This is not a free option. The investor has to pay for a protective place and costs are in relation to the amount of money he wants to protect. This policy only comes into force if the financial vehicle drops; If the value rises, then the investor will only lose what he paid for protection. Investors are protected because if the value of the vehicle changes, the protection policy will pay for the lost amount. Most investors have no reservations about the increase, but the reduction can cause major losses. There are several ways to protect against losses, and protection policy is one of them. This will place the ceiling on the total amount of loss experienced by investors if the vehicle reduces the price.

While protective PUT is a useful choice for investors, it is not free and will eat a little in investors' profits. The price of policy is determined by factors such as the risk and forEssential financial vehicle, but is usually determined by the value of the financial vehicle and the amount of protection that investors want. Although investors do not benefit protection because the value of their investment increases, the loss is usually nominal and is much better than the loss associated with decreasing investment.

Protective PUT can only be used if the value of the investment is reduced. If the value increases, then policy does nothing to reduce growth, outside the original costs of politics. At the same time, because protection costs money, the investor should not sell or trade in an investment vehicle until the value exceeds the price of protection; Otherwise, the investor will lose money.

Investor protection can be traded on protection based on what the investor has lost. When the investor loses the investment, policy protects the investor by paying for part or all loss, depending on politics, but will not pay more than losses. For example, if a policy is worth $ 2,000 in the US (USD) and the investor loses forIts $ 500 investment, then the policy pays $ 500, not $ 2,000.