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Using Put Options to Profit in a Falling Market |
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No matter what the current market conditions are it is always a good idea to be ready for a sudden pullback. Put options allow you to profit if the market or a specific stocks declines in price. It's almost like having an insurance policy on your investments. A put option gives its owner the right to sell the underlying stock. Put buyers want the price of the stock to fall. Generally, when you buy a call option you will make money if the stock price goes up. But if you buy a put option you`ll make money if the stock price declines. New option traders are surprised that you can make money if a stock goes down -- but you can! It`s just one of the great things about options. In this day and age a long and drawn-out bear market is unlikely to happen. Computer-driven trading and push-button money transfers will make a bear market happen almost overnight. In this scenario most investors will be unable to get their money out in time. So it pays to have some "portfolio insurance" to guard against a market collapse. Options can be used for this. And even if the market itself doesn`t collapse individual stocks do almost every day. You can also use options to profit from these short-term moves. In both cases you are using the same strategy. The strategy is to buy put options. A put pays off when the price of a stock declines. Buying a put option is as easy as buying a call option. Our weekly e-mail report, Ultimate Options Strategies, offers detailed trading advice and specific buy/sell advice for puts, calls, LEAPs and more. For additional information click here.
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Instant Access to Stock Option Trading Advice
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