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Strategies & Market Trends : Working All Day, But Trading Behind the Bosses Back Thread -- Ignore unavailable to you. Want to Upgrade?

To: DlphcOracl who wrote (710)	3/29/1999 12:24:00 AM
From: Mark[ox5]	Respond to of 779

I think the basic strategy is buying PUTS... against your current position... A PUT is the right, but not the obligation to sell 100 shares of a security at a certain price in the future. Hence if you had 100 AOL shares right now... at around $125, you might buy something like 1 December 150 PUT contract. That entitles you to sell your 100 AOL shares at $150 sometime before December. (you dont have to, its just a right to... not an obligation) That way if: 1) AOL continues up... your PUT contract becomes a moot point (i.e. if AOL is $200 in December, why would you sell it at $150?) and all you lose is what you paid for for the contract (think of it as insurance) OR 2) AOL is below $150 in December, than you have "protected" yourself and can sell your shares at $150 instead of the current market price. That is the basic "hedge" for options strategy.... I would type "options" in subject search on SI and there are a few good threads where people answer questions such as yours better than I can! I use them more aggressively as you can see ;) Mark