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Trading Options as Insurance
from: Andrew Clacy* With the market volatility we've seen over the past few years,
more investors are recognizing the value of using puts as part
of their everyday trading strategy. For investors who put money
in the volatile Internet or biotech sectors, the rewards can be
enormous. But so can the risks--if the stock price rises instead
of falls, this strategy may limit the upside potential by the
cost of the put. By adding put options to their overall
investment strategy, investors can better position themselves
for any direction the market may head. * Using protective puts
is simple and can be relatively inexpensive given the insurance
value. * Using protective puts is simple and can be relatively
inexpensive given the insurance value. For each 100 shares of
stock you buy, buy one protective put at a strike price or two
below the current market price. For example, if you buy a stock
at $50, you'd buy either the 47.5 put or the 45 put. That way,
if the stock plummets, you'll be able to sell the stock for
close to what you paid for it. * On the other hand, if the stock
jumps as you hope, you'll participate fully in the upswing less
the small amount you paid for the protective puts. In this way,
the puts act as an insurance policy. * The Latin phrase known to
most Stock Market Traders is "Carpe Diem." It means seize the
day. How much longer are you going to wait around for the
perfect wealth creation system?
* Wealth is your destiny...so please, settle back in your
favourite chair and discover exactly how to claim it.
Today is the first day of the rest of *YOUR* life!
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