If so, investors should consider employing equity options for portfolio management.
Investors can protect the value of their equity holdings by purchasing put options.
A put option holding can protect an equity against a sharp decline. In a volatile market environment, many investors wish to own stock, but fear a sharp price correction. Long put options can greatly alleviate an investor's bearish fears. The protective put strategy involves the simultaneous purchase of a stock and a put option or the purchase of a put versus stock already owned in the investor's portfolio. Since the put option allows the holder to sell stock at a specified strike price, the maximum loss of the stock position is known when the put is purchased.