Options are a key tool for locking in stock profits. Using options, it's possibly to insure stock gains. When an investor buys put options, they only risk losing the value of the premium paid for the option, while locking in the accumulated gains.

There are two primary options strategies designed to lock in a profit: the protective put and the married put.

The protective put strategy locks in gains from previously purchased shares that have risen in value. The investor owns stock and wants to insure against the stock losing value in the near term and wants to protect most of the accumulated gains, spending some money to buy put options that help insure against a decrease.

No matter how much the underlying stock decreases in value during the option's lifetime, the put option guarantees the investor the right to sell at the strike price. Because of this guarantee, the investor has time to react and to choose to sell, or not to sell, the stock, if the price does indeed fall. Utilizing the protective put strategy also retains the benefits of stock ownership, for example, dividends.

The potential profit using a protective put strategy is unlimited. If the put expires in-the-money, any gains realized from in an increase in its value will offset any decline in the unrealized profits from the underlying shares. If, however, the put expires at- or out-of-the-money, the loss is limited to the premium paid for the put.

During the life of the put option, the investor can sell the underlying stock or the put option any time before it expires. This situation may occur if the stock gains in value and looks like it will continue gaining. If the put retains market value, the investor can then sell the put. The premium received from selling the put option should offset any losses from a decline in underlying share value. If the option closes in-the-money, the investor can elect to exercise his right to sell the underlying shares at the put's strike price.

The married put strategy is very similar to a protective put, except the underlying shares are purchased in conjunction with the options, rather than owning them beforehand. The options are married to the stock. The married put also provides the benefits of owning stock while protecting against market downturns. Matching or marrying owned shares of stock with an equivalent number of put options on the same underlying stock limits risk by protecting the stock from a decrease in market price.

While a protective put is specifically designed to lock in gains, a married put strategy works similarly. The married put insures against a predetermined decrease in value during the lifetime of the put. No matter how much the underlying stock decreases in value during the option's lifetime, the investor locked in a guaranteed selling price. Because of this guarantee, the investor has time to react and to choose to sell, or not to sell, the stock, in the price falls. Profit is unlimited, while the maximum loss is limited to the stock purchase prices less the strike price, plus the premium paid.