What is a protective put, and when would I use one?

A protective put is a combination order of long stock and long put: you buy shares of a stock and buy a put option against those shares, both executed together as a single trade. The put acts as built-in insurance from the moment you enter the position — if the stock drops below the strike, the put gains value and offsets the loss on the shares. If the stock rises, you keep the upside; your only cost is the put's premium.

Common uses include:

• Entering a new position ahead of an earnings report or other binary event, without taking on unlimited downside risk
• Establishing exposure to a stock with a defined, known worst-case loss from day one
• Getting into a name you're bullish on while limiting how much you can lose if you're wrong