Just want to know what you guys think of this plan. I want to use put options as insurance, but insuring year round becomes very expensive. I realized most of my major losses came from bad earnings reports, so why not buy weekly puts to protect downside just before earnings release? They seem to cost next to nothing compared to the investment in common stock, and could be well worth the money if the stock dips hard. I plan on buying these before every quarter release.
This obviously does not protect against a broad market crash, but I view that as an opportunity to average down if fundamentals are still solid and am therefore okay with a temporary drawdown. If there is something fundamentally wrong with the company, the option gives you a exit strategy without losing half your initial investment. They are also so cheap that it does not matter if they expire worthless.
I don’t wish to wake up to 30% overnight losses anymore due to bad earnings and guidance and think this strategy could help for companies with option chains. Please let me know if you guys have tried this or see something I currently do not about the strategy.
Submitted January 04, 2018 at 11:43PM by ndrempel http://ift.tt/2AvYUm4
