Married Put

An option strategy whereby an investor, holding a long position in stock, purchases a put on the same stock to protect against a depreciation in the stock's price.

Potential gains or losses from a married put strategy are created from the net effect of a long position in both the put and its underlying stock. This strategy establishes a floor, allowing unlimited profits while limiting the potential loss. Should the stock price decline below the strike price before expiration of the option, the investor would exercise the put option and sell his or her stock at the strike price. Should the stock price increase above the strike price, the option would not be exercised and the investor could sell the stock at the higher price and recognize a profit if the stock price is above the overall cost of the position.

In essence, this is like purchasing insurance against your stock