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Non-Tech : Meet Gene, a NASDAQ Market Maker
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To: gene_the_mm who wrote (518)8/13/2000 4:35:34 PM
From: Mark Z  Read Replies (2) of 1426
 
Gene -

I've a question. Can anyone explain what the benefit is of being able to buy a 'protective put' against shares in a retirement account? If one believes their stock is going to take a hit, why not just sell the common? Commissions are less, you don't have to absorb any premium, your losses due to slippage will probably be lower. So why do brokerages push 'protective puts' as a panacea? Is it just because their profit margins are greater on option trades than equity trades?

The only benefit I can see is if you want to synthesize a short position by selling a deep itm call against shares while buying otm puts. But boy do you get clobbered if your stock doesn't tank!
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