Did I say mandatory? I meant optional! You’re “free” to die in a cardboard box under a freeway as a market capitalist scarecrow warning to the other ants so they keep showing up to make us more!
Did I say mandatory? I meant optional! You’re “free” to die in a cardboard box under a freeway as a market capitalist scarecrow warning to the other ants so they keep showing up to make us more!
But the point of a put contract would be to lock in the strike price for a duration determined by the expiration date. If put contracts were purchased for the duration of the loan, the potential risk of being unable to pay the bank due to depreciation would be mitigated.
Like how farmers buy puts on their commodity to protect themselves from a bad year.
It costs money to buy a put contract to protect the loan.
So if you need a 1mil loan, now you also gotta buy puts that’ll protect a downturn of 1mil. So now you gotta sell stock which will be taxed. It’s less than 1mil so you’re taxed less, but you will have taxes.
Edit: you could zero cost collar (puts + covered calls) your investment to protect it’s current value, but you’ll give up potential gains as well to get the zero cost part. But this would be a way to protect the value without selling. If the options get exercised though, you’d then have some taxes to pay.