This is a great example of using options to lower risk. You can also purchase insurance outright against a stock falling - if you own a stock and buy puts for it, you'll be protected against the stock falling below the put's strike (since you can literally sell it for the strike price to the person who wrote the puts).
This was originally one of the main uses of options, which is why an option's price is called a premium - it's an insurance premium.
However, if it is stock that is under SEC "rule 144" lockup
(which usually applies for 6 months following an IPO and most M&As), then the legality of doing that is murky.
It used to be outright illegal. The letter of the law has changed, and now it is unclear. I was in this situation, and personally couldn't find a single CPA or lawyer who would say "I believe it's now legal to hedge rule 144 locked shares". (And as a result, I didn't, and lost lots of money, and almost came out with a net loss on a x5 exit)
Not always true: even if you own the shares outright, you may be subject to obscure SEC regulations about what you can do. When I worked at BAC, we weren't allowed to engage in any speculative transactions in any security. Covered calls only.
At my current employer, no options transactions are permitted on company stock, not even covered calls or protective puts. Of course, you can just sell it and do whatever you want with the proceeds.
This was originally one of the main uses of options, which is why an option's price is called a premium - it's an insurance premium.