After posting gains in a portfolio, the last thing you want to do is give them back. Protecting your stock portfolio is an extremely important part of portfolio management. It is necessary to understand how each works and how well each achieves the goals of protecting portfolio gains.Types of Protection and Making the Right ChoiceThe consideration to buy protection is typically due to a fear that something negative will happen in the short term which will impact your portfolio.
While many professional traders use them for speculation, they can also be powerful hedging tools when applied properly. Basically, options are contracts that give buyers the right, but not the obligation, to buy or sell a stock or security at set price at a future date. Listed options are available for most actively traded stocks and ETFs today.
If you have a stock or ETF that you want to protect for a certain amount of time, options can be one way to achieve that. What is a put option. If you recall our detailed series on how call options work, put options are the opposite. An Example of Put Option HedgingThe best way is to explain this concept is with an example. Earnings season is upon us.And with earnings season comes the oft-asked.
Using put options to protect your portfolio znacenje