Abstract
Purchase of a protective put does not violate relevant legal standards, including those focusing on the performance of individual securities. As regards ERISA, the absence of explicit prohibitions in Section 404 suggests that the appropriate legal question is whether the pension manager has achieved an appropriate level of portfolio risk at a fair price, rather than whether the protective put falls into some disfavored category such as speculative investments or wasting assets. This does not mean that purchase of a protective put is always appropriate. A money manager should compare purchasing a put with alternative ways of reducing risk. In doing so, he should consider such factors as the price variability of the common stock, the premium on the put and taxes. O
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