This is not intended as investment advice, and I'm no expert, but when I buy protective puts I first decide what price I would have been happy with for my stock, say one month ago, and then buy out of the money puts at that level. Those will cost you much less than buying puts at the money (current price), substantially less in fact, which means you buy peace of mind, at a reasonable cost. For example, to purchase July 99 puts at $125 costs about $13/share today, but July 99 puts at $100 costs only about $4/share. What price would you have been happy with one month ago?
Next I decide how long I want feel vulnerable for (3 months is my usual window, hence July, but longer term may make sense if you really want to guarantee a sale price and don't want to sell now).
Also, it helps to buy puts while the stock is climbing, they cost less (since the sellers tend to feel that the stock will continue to climb).
Remember above all, that options always expire, and that the protection you are purchasing only lasts until the expiration date.
Hope this helps.
P. |
