Monday, April 20, 2009
A much safer alternative to naked puts
I was thinking and thinking today about the correct naked puts I wrote, but didn't manage to keep them and exited with little profit. The reason as I said was the stress over "what if" the stock tanks and "what if" the market tanks? More professional traders hedge their puts by buying below strike puts of the same security (ex. sell $29 GDX puts, buy $28 GDX puts). This way, you can sleep like a baby and you know your loss is really limited. This is called a bullish put spread. We can also try bearish/bullish call/put spread, whichever we like. The other example is JAVA naked puts. I could have bought $4 puts to hedge my naked $5 puts and the profit would have been realized as early as today. It seems these kinds of ideas can give you more reward and can make you really relaxed. I am thinking about some and will let you know about some new trading ideas hopefully soon. Happy trading.
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Smart - You posted on my blog asking if our classes are more advanced than the entry level class you took. Absolutely. In fact I teach this very strategy in detail and also do it live in one of our advanced classes.
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