The simultaneous purchase of stock and put options representing an equivalent number of shares when the position is designated at that time as a hedge. This is a limited risk strategy during the life of the puts because the stock can always be sold for at least the strike price of the purchased puts.
See Also:
Put: An option contract that gives the holder the right to sell the underlying security at a specified price for a certain fixed period of time.
Strategy: With respect to option investments, a preconceived, logical plan of position selection and follow-up action.
