A put option consists of three parts. The first is a written agreement. When you purchase a put, you are purchasing the right to sell the underlying currency to someone at a specified price for a predetermined length of time. You might buy a put now to sell a lot of GBP/USD at $2.0000 at any time between now and a future date of your choosing. If the currency pair falls to 1.9900, you may still sell it for a profit at 2.0000. In reality, it makes no difference how much the currency falls. If you are still inside your time frame, you can sell the currency for 2,0000 at any moment. The strike price is the predefined price (2.0000) that you have chosen for your contract. The second factor is time. Options are accessible on a monthly basis. That means you may get one that is valid until the end of the month or until the end of the year. It is entirely up to you to make your decision. Finally, alternatives are not free. The premium is the cost of an option. The bigger the premium, the more valuable the alternatives. A long-term option with a terrific strike price is more expensive than a short-term option with a more speculative strike price.

A protective put is a risk management strategy in options trading, used to safeguard against potential losses. It involves purchasing a put option on an asset that you already own, giving you the right (but not the obligation) to sell the asset at a specified price (the strike price) within a certain timeframe.

If the asset’s price falls below the strike price, the put option gains value, offsetting losses on the underlying asset. This "insurance" protects the investor from significant downside risk, while still allowing them to benefit if the asset's price rises.

Protective puts are commonly used by investors who want to hedge their positions without selling their holdings, offering downside protection while maintaining upside potential. It’s a key tool for managing market volatility.