Protective put

Example

Say you own 100 shares bought at $50 and buy a $47 put for $1.50, or $150. If the stock drops to $35 by expiration, you can still sell at $47, so your loss is capped at $3 per share plus the premium, $450 in total, instead of $1,500. If the stock rises instead, the put expires worthless and the $150 is the cost of that insurance.

Hypothetical numbers, for illustration only.