Calculator
Protective Put Calculator
Protective Put Calculator
Stock Position
Protective Put
Floor Price (Max Protection)
$92.75
Hedge Analysis
All 1,000 shares are fully covered by the puts. The hard floor sits at $92.75 per share (strike minus premium), capping your maximum loss at $7,250. Insurance costs 2.3% of position value, a moderate premium typical for at- or near-the-money protection on a standard-volatility name.
*Option premiums, volatility, and bid-ask spreads change continuously; the floor and cost figures here assume the premium entered is paid. This model values protection at expiration and excludes brokerage and tax. Educational only, not investment advice.
What a Protective Put Does
A protective put is an insurance policy on shares you own: you buy a put option while keeping the stock, which lets you sell at the strike price no matter how far it falls. The upside of the shares remains yours, because puts do not cap gains — they only install a floor. For Australian investors holding large unrealised gains they do not want to realise (selling would forfeit the 50% CGT discount or trigger a tax bill), or who are nervous about a binary event like a full-year result, an AGM update or an election, the protective put is the standard single-stock hedge on the ASX options market. The cost of the policy is the premium, and like house insurance it is spent whether or not a disaster happens. The strategy's appeal is that it converts an undefined downside into a defined one — a known maximum loss — while leaving the right tail fully open. That asymmetry is worth paying for in concentrated positions, unlisted or escrowed stock you cannot diversify yet, or portfolios with hard spending needs. The tradeoff is straightforward: the premium is a drag on returns in normal markets, so the decision is really about how much the certainty is worth. This tool prices that certainty: it computes the floor price per share, the total insurance cost as a percentage of the position, the share of the portfolio actually covered, and the exact maximum loss if everything goes wrong.
How the Hedge Math Works
With a protective put, the payoff on each insured share is capped below at the strike price: if the stock finishes anywhere below the strike, the put is exercised or sold for the difference, so the position is worth strike minus the premium paid — the floor. Above the strike, the put expires worthless and the shares profit normally; the premium's only cost. The floor price is therefore strike price minus premium per share, the level below which the portfolio cannot fall per share. Maximum loss on the insured portion equals (stock price − floor) times the number of insured shares, plus the full current value of any unhedged shares. Coverage accounting matters as much as the floor. One ASX option contract covers 100 shares, so a 1,000-share position needs ten contracts for full coverage; buying fewer insures only a percentage of the portfolio and the rest keeps its full downside. The insurance cost percentage — total premium divided by position value — is the clearest comparison metric: it lets you judge an at-the-money policy against a cheap out-of-the-money tail policy on the same footing. This calculator runs all of those numbers simultaneously, including the effective cost basis after the hedge, so you know exactly what the insurance adds to your break-even.
Expert Insights
Strike Selection Sets the Deductible
The strike price is your insurance deductible: an at-the-money put carries no deductible but can cost several percent of the position for a quarter, while a 10% out-of-the-money strike costs a fraction of that and only pays in a genuine crash. Decide first whether you fear a routine pullback or a tail event, then buy the strike that matches. Buying the wrong deductible — paying top dollar to insure the first 5% — is the most common way the strategy underwhelms.
Hedge When Volatility Is Cheap, Not When Fear Is High
Put premiums are priced by demand: when everyone is scared, implied volatility soars and the same protection costs two or three times more. On the ASX this is most visible ahead of reporting season and during global panics, when option liquidity thins and spreads widen. The disciplined approach is to buy protection in calm markets while holding the hedge through the event; entering hedges mid-panic means paying a fear premium that often evaporates before the protection is needed.
Mind ASX Option Liquidity Before Sizing Up
ASX single-stock options are far thinner than US equivalents: many series trade wide bid-ask spreads of several cents or more, and deep-strike contracts may barely quote at all. A hedge that looks cheap at the mid-price can cost materially more to actually cross, and closing early can surrender much of that spread again. Check open interest and the real spread width before committing to a rolling program, and favour liquid large-cap names where the insurance market is deepest.
Actionable Tips
- 1
Compare the Cost Against a Stop-Loss Alternative
A stop-loss order costs nothing but executes at the market price and can gap through your level overnight — a real risk on the ASX, which opens after Wall Street has already moved. Run both this calculator's hedge cost and your stop-loss assumption side by side: the put's premium is the price of guaranteed execution. If the premium exceeds what you could plausibly lose to gap risk, the hedge must be justified by certainty rather than math.
- 2
Match Contracts to Your Exact Share Count
Enter your actual share count and check whether the hedge is full or partial before buying. One contract covers exactly 100 shares; if your position does not divide evenly, decide intentionally which odd lots go uninsured. A half-hedge entered by mistake is a full hedge that simply forgot half the position.
- 3
Check Implied Volatility Before Paying the Premium
Pull the current implied volatility for the put you are buying from the ASX options chain. If IV is historically elevated, the premium includes a fear surcharge and the same strike may be cheaper later. Entering the premium into this tool at today's actual quote gives the true cost; entering what you 'expect' the premium to be after a volatility crush is how hedges get priced too optimistically.
Real-World Examples
Sarah Kept Her Tax Lot and Her Sleep
Sarah held a large, low-cost-basis technology position she refused to sell because realising the gain would forfeit the CGT discount and trigger a six-figure tax bill. Ahead of a volatile results season she bought five-percent out-of-the-money puts covering every share. The stock fell 18%, her puts paid off almost dollar for dollar, and she kept the shares — the hedge had cost about 1.4% of the position and saved her from either the loss or a forced taxable sale.
Raj Stopped Overpaying for Fear
Raj regularly bought at-the-money puts during market panics and watched the premiums deflate when things calmed. He switched to a calendar program: buying tail protection in calm months at low implied volatility and holding it through events. His annual hedge budget dropped by half while the coverage level actually improved.
Monica Sized Her Event Hedge Correctly
Monica wanted to hedge 600 shares into a full-year profit announcement and initially planned three contracts. Checking the calculator revealed three contracts protect only 300 shares — half her position — while full coverage requires six. Making that choice deliberately, she sized to the coverage she actually wanted instead of assuming a contract-per-hundred-shares rule she had half remembered.
Glossary of Terms
- Protective Put
- Owning a put option on shares you already hold, giving you the right to sell at the strike price and creating a floor on losses.
- Floor Price
- The lowest value a hedged share can reach: the put strike minus the premium paid. Below this level, the put's payoff replaces further share losses.
- Tail Risk
- The low-probability event at the far end of the return distribution — a crash of 30% or more — that normal hedging and stop-losses often fail to cover.
Frequently Asked Questions
Everything you need to know about this topic.
Ivy Sinclair-Wren
Financial Chaos Analyst
Ivy Sinclair-Wren is a Financial Chaos Analyst covering investing, AI, wealth psychology, and the emotional consequences of opening finance apps during market crashes. Based in Melbourne, she specializes in demystifying the Australian tax code and helping users navigate the intersection of spreadsheet logic and human irrationality.