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To: Mark Z who wrote (549)	8/14/2000 10:14:30 PM
From: KFE	Respond to of 1426

Mark, Protective puts are bought on a stock that you are bullish on but just want to limit your losses. I'm confused. If you're bullish, what losses are you limiting? Despite what you see posted by those whose trades are not real time every stock that you are bullish on does not go up. Protective puts are bought so that your maximum loss on the underlying stock can be determined in advance. I still don't understand how buying puts is advantageous over selling & rebuying the common in a retirement account. First, whether it is a retirement account or taxable account makes no difference. You are buying the puts as a hedge against a long position which was not bought for a quick trade. In the example you cited if you had bought a protective put against a long position and you thought that the stock (CSCO) was going to tank then you could have sold the stock and kept the put and done even better. Hind sight is terrific but this type of trade (protective put) is really not meant for a stock that you are going to trade in and out of. Regards, Ken

To: Mark Z who wrote (549)	8/15/2000 9:51:35 AM
From: dannobee	Respond to of 1426

The protective puts are treated more like an insurance policy than an event for generating capital gains. It limits your exposure of stock specific risk. This is more common in a taxed account, but could occur in either. The premium obviously would be written off as a loss if the option expires worthless in the taxed account. Although the manager could also create a synthetic long position using LEAPS and puts at a reduced cost to purchasing common stock (assuming LEAPS are available on the stock). But for the sake of our discussion, the protective puts are used to "lock in" gains on a stock, and the strike price should reflect locking in the gains. Normally one wouldn't buy puts if there wasn't a gain to protect.