You insure your home. You insure your life and the lives of your loved ones. Why not insure your investments?

With current market conditions tossing most portfolios around, it would make sense to protect your portfolio. After all, the work we do significantly lowers the risk of losing money in an investment we choose to get involved in. But we never completely eliminate all the risk in the market.

Buying a protective put will help protect your new stock purchases in the market. This can be really helpful when you want to buy a particular stock, but the overall bias in the market is down. What is a put? A put is a contract that gives the buyer the right to sell stock at a certain price and during a defined period of time, up to the expiration of the contract.

When you buy a stock, three possible events can occur.