[spider]

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am i wrong? if so, please explain how the guarantee works. is there a buyer who will always bid at L*X? if so, is there a cost to this type of "insurance"?

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I found a reference to this and it really is a guarantee (an implied put basically) unlike a normal stop loss. I don't understand the payment mechanism however. The web site I looked at said "3 points" was standard but I don't quite understand that. OP here seems to be saying you pay a larger spread but I don't completely understand that either (i.e. what this works out to as a percentage of the possible loss in the stock's price).

In any event, I assume the implicit cost of this guarantee must be comparable to buying a put since it's effectively doing the exact same thing if I understand correctly.