Stock loans: Question about "Put" also defined as "Insurance Policy"

In the US, the Reg T long margin requirement is 50% and the Margin Maintenance Requirement is 25% (MMR) though brokers can require more.

If your security is marginable and fully paid for, you can borrow an equal amount of its value to buy more stock. If you do so, your equity drops to 50%. If the stock goes bankrupt, the entire proceeds are gone and you owe the brokerage firm the dollar amount of the loan.

As the price drops, the amount of your equity drops, reducing the amount of margin. Your broker monitors this and will sell out your position if the MMR level is breached. This occurs when the security loses 1/3 of its value and which is 2/3 of your margin deposit. However, this isn't guaranteed in real life because if share price collapses and gaps through the MMR, you could end up losing more.

For example, you put up $5k and at 50% margin, you buy $10k worth of stock. The MMR level is 4/3 times the debit balance or $6,666.67. At that point you would have $1,666.67 of equity and on a $5,000 loan, margin would be 25%.

And yes, one could buy a long put to limit the potential loss of a margined security.

A more complex and riskier scenario is using your fully paid marginable long stock to fund the establishment of a short position in another security. Because shorting has open ended upside loss, your potential loss could be significantly more.