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Poet, you know much more about options than I do, and I am basically winging it. The way I see it, protective puts are the mirror image of covered calls. CCs provide protection against a falling market, but if market explodes upwards you lose your stock. Protective puts, or married puts as I have heard them called, also provide protection against a falling market, at a price, while preserving your stock. And they are much better than a stop, because stops can be blown out, or the stock can gap down and take you out at a serious loss. But I view both strategies as bullish strategies, that is, they work during a volatile market when one is still fundamentally bullish. I think if one were bearish, one could sell short and buy calls as a hedge. If I ever got that bearish, though, I would rather stay in cash. |
