Hi Duke, RE: "buy protective puts...Help me here. Is there a trick to this??? ...Got an example??"
Yes, collars. I had to implement a collar strategy because I just couldn't let my portfolio go below a certain level.
However, collars can also be an effective way to squeeze out money in a questionable market. Unfortunately, it locks a person into a range, so the upside is limited, but so is the downside. I couldn't afford any more of a downside, so I had to lock in.
Half of the cash premium received from the call was used to make the protective put, and the other half of the premium is pure gain. And the gain from the premiums was pretty reasonable. I definitely wouldn't call it casualty insurance. (The Red Herring has a good article discussing collars. They should build on this theme and provide examples though, so the reader knows how to implement them.)
The gain that comes from the call premium also provided the venue to buy more shares of high-tech stocks. Overall, through a collar, the number of shares owned increased by 10%.
While the market has beaten down my portfolio badly, the upside is that I've been able to increase the number of shares I own by 10%, in addition to increasing cash position to 10%.
I would recommend looking into this type of strategy.
Regards,
Amy J |
