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If you own a stock and want to protect that stock's value, then Protective Puts act like an insurance policy on your investment.
Since it will cost you some money to put on this trade, it can put limits on your profits on the stock that you own, but it also protects you if your stock loses value.
A Covered Put Option is the exact opposite of a Covered Call Option.
If you are shorting a stock, and you are neutral to slightly bearish about the stock's potential, then a Covered Put Options Strategy (also known as a Sell-Write) can be a way to receive enhanced premiums, and can also offset some losses if the stock appreciates in value.
If you are buying and holding a stock, and you are neutral to slightly bullish about the stock's upside potential, then a Covered Call Options Strategy (also known as a Buy-Write) can be a way to receive enhanced premiums, and can also offset some losses if the stock declines in value.
Mistakes sabotage every area of our lives, and trading is no exception. The good news is that we can learn from our mistakes. In fact, seeing mistakes as learning opportunities is a popular approach to viewing human error and with good reason. Mistakes provide learning lessons aplenty, although they can be excruciatingly painful to both the psyche and the bank account.
For years, technical analysis has had its critics.
They’ve argued that forecasting future price movement based on prior price movement is akin to reading the tea leaves. In fact, fundamental analysts, like Warren Buffett are quick to call technical analysis worthless.
He’s certainly entitled to his opinion.
For an individual trader, options can be a little intimidating.
However, if you know the pitfalls and how to increase your odds of success, the better you stand to do overall.
All too often many investors trade options by buying out-of-the-money, short-term options, since they cost less than long-term options.