Put Options to protect your stock portfolio

AW10

Well-Known Member
#11
one question what would happen if i sell buy option and buy put option?
Renu,
This strategy is one of the smartest way to protect your portfolio. (Warren Buffett uses it to protect his long term portfolio). This option strategy is called COLLAR. Worth mastering it. By using it, you can reduce the insurance cost (net premium) of your portfolio. Always better then buying naked PUT options where premium outgo is high.

As you would be writing an Option hence it is IMPORTANT to understand the RISK involved with this strategy.

Happy Trading.
 

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