Option Strategy - Protective Put
Protective puts are often used as an alternative to stop orders. The problem with stop orders is they sometimes work when you don’t want them to work, and when you really need them they don’t work at all.
Many investors will buy a protective put when they’ve seen a nice run-up on the stock price, and they want to protect their unrealized profits against a downturn. It’s sometimes easier to part with the money to pay for the put when you’ve already seen decent gains on the stock.