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Why purchase put options?

1) Hedging: Protective Put Option Strategy. Put options can be a form of insurance for stocks. If your stocks decrease in value during a specific time period, a put option gives you the right to sell your stock at an agreed-upon price. Investors who wish to protect their portfolio’s value will therefore purchase puts in case prices fall. The action of purchasing a put option while holding the underlying security is called a Protective Put. 

2) Bearish: Long Put Option Strategy. Investors can also buy put options without holding the underlying securities, known as a Long Put Option. This allows for greater flexibility and leverage in a bear market. Conversely, the risk of this strategy is that it may lose value in a relatively short amount of time and incur permanent loss. 

Option trading entails significant risk and is not appropriate for all investors. Option investors can rapidly lose the entire value of their investment in a short period of time and incur permanent loss by expiration date. You need to complete an options trading application and get approval on eligible accounts. Please read the Characteristics and Risks of Standardized Options and Option Spread Risk Disclosure before trading options.

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