How to trade options in the stock market as a hedge
Hello, Today I will give a short article how to use options as a hedge.
When you buy a stock, you expose yourself to a high risk.
For example if you invest 100 stocks in APPLE you expose yourself to 19500$ (each stock is around 195$)
But if you buy a call option, the lose can be the premium of the option itself.
So if you have the stock itself and you afraid the stock would drop down you can buy the options for 200$, if the stock isn’t moved at all, you will lose 200$, but if the stock dropped by 10% you will lose less than what you could, if you didn’t had the option.
To secure yourself from the downside, you have to buy a Put option.
If you short on the stock, you have to buy a call option.
There are stocks that the premium pretty cheap around 20 usd for example Symantec.
Each option give a protection for 100 stocks, so if you got 1000 stocks, you need to buy 10 options.
If the market wont move you will lose just the premium, like insurance, but if the market drop you will lose less.
In summary:
call option is for the upside, put option is for the downside.
If you want to know which stock miners to buy today Click Here!
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