DATE: July 22, 2013 QUESTION: How can stock index put options be used to protect a portfolio? ANSWER: Volatility in the market can create anxious investors who are concerned about being too heavily invested in equities, yet at the same time, are nervous to sell their stocks because of their historically superior performance over a number of years. The Protective Put strategy, involving the purchase of stock index put options, may be executed to partially offset a drop in portfolio value if the market decline. Or, the Protective Put strategy may allow an investor to keep their portfolio so that participation in a market rise is still possible. To learn more about the Protective Put strategy, view this week's segment of "Ask the Institute."
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