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Strategies & Market Trends : You buy a stock. It goes down, now what?
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To: Bald Eagle who wrote (105)7/24/1998 9:08:00 PM
From: Investor2  Read Replies (1) of 112
 
Thanks for the response. So, as I see it, your solution is to purchase puts (for insurance) instead of a setting a stop loss. Any future profits will be reduced by the premium, but you are guaranteed to lose no more than your stock purchase price minus the strike price of the put plus the premium.

Selling the calls is a separate transaction that adds a little income but somewhat reduces your upside potential, should the stock take off.

1. Is that how you see it?

2. How far below the purchase price will put strike price be?

3. Why didn't you just sell puts instead of purchasing the stock?

Best wishes,

I2
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