Bullish on the underlying stock.
The investor employing the protective put strategy owns shares of
underlying stock from a previous purchase, and generally has unrealized
profits accrued from an increase in value of those shares. He might have
concerns about unknown, downside market risks in the near term and
wants some protection for the gains in share value. Purchasing puts
while holding shares of underlying stock is a directional strategy, but a
bullish one.
The investor employing the protective put strategy owns shares of
underlying stock from a previous purchase, and generally has unrealized
profits accrued from an increase in value of those shares. He might have
concerns about unknown, downside market risks in the near term and
wants some protection for the gains in share value. Purchasing puts
while holding shares of underlying stock is a directional strategy, but a
bullish one.