Greenspan put

A 'put' is a type of option contract that increases in value as the price of the underlying asset falls.

A 'put' is a type of option contract that increases in value as the price of the underlying asset falls. Puts are often used by traders as insurance or to hedge their positions: they may go long on a stock but also take a put option on it to reduce their losses should its price fall. This effectively limits their downside.

Advertisement - Article continues below

In the 1990s, the market came to believe that the US Federal Reserve, then chaired by Alan Greenspan, was effectively providing the same sort of service for the market as a whole by guaranteeing that it would underwrite it at a certain level. Hence the phrase 'Greenspan put'. This belief was vindicated by the Fed's prompt action in cutting rates in tricky moments, such as in the wake of the LTCM hedge-fund crisis, and by its willingness to keep rates low throughout the 1990s.

See Tim Bennett's video tutorial: What are options and covered warrants?




Technical analysis

Technical analysts or 'chartists' attempt to predict future share price (or index) movements by looking at past movements.
5 Jun 2020


A bond is a type of IOU issued by a government, local authority or company to raise money.
19 May 2020

Quantitative investing

Quantitative investing uses sophisticated computer-based mathematical models to identify and carry out trades.
8 May 2020

Quantitative easing (QE)

Quantitative easing (QE) involves electronically expanding a central bank's balance sheet.
8 May 2020

Most Popular


These seven charts show exactly why you must own gold today

Covid-19 is accelerating many trends that were already in existence. The rising gold price is one such trend. These seven charts, says Dominic Frisby,…
3 Jun 2020

Disease, rioting and mass unemployment – so why are markets soaring?

Despite some pretty strong headwinds in the last year, America’s S&P 500 stock index is close to all-time highs. John Stepek explains why markets seem…
4 Jun 2020
EU Economy

Why a stronger euro is good news for investors

The fragile state of the eurozone has for a long time brought the threat of deflation. But the ECB’s latest moves have dampened those fears. John Step…
5 Jun 2020