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Suppose you own 5000 shares that are worth £25 each. How can put option be used...

Suppose you own 5000 shares that are worth £25 each. How can put option be used to provide you with insurance against a decline in the value of your holding over the next four months?
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Put option can be used as insurance against the falling price of the stock. A put option with strike price greater than or equal to 25 GBP can be purchased. Thus if the stock price falls below the 25 GBP mark, due to the put option we can sell the stock at the agreed strike price. In case the price rises, our loss will be limited to the premium paid.

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