Mike, If NNC had gone up past $95, a person who had shelled out $9500 for 100 shares would have only lost $300 in expired puts, I think that is a small price to pay in order to insure your investment and be able to sleep at night. After the stock cleared $98 you would be in the green again which isn't too bad. If you wanted only partial protection you could buy $150 worth of puts so break even would have been $96.50 Personally, I think that buying stock at $95 would have been crazy because it was technically WAY overbought but it's just an example. However, if you had bought at $95 and wanted to go long then it would have made sense to buy puts at $87.40 (8% loss) or just bail on the stock.
I will email you some trading rules which are excellent, they are not mine, not anyones, just good rules to trade by.
As for calling an uptrend I won't do it, I've blown enough deals trying to call tops and bottoms, it's completely futile in my opinion. The best thing to do, puts/calls or stock is to wait until you actually 'see' a strong trend, up or down and then make your move.
Randy |
