CHAPTER 5

Managing Profits and Losses

The conservative risk profile discourages short-term decisions, and speculation is contrary to a safe and sensible investing philosophy. A buy–hold–sell technique is buying well-selected, high-quality stocks, hold for the long term, and sell only when the fundamentals change. This smart investing approach does not preclude protecting profits when price levels become volatile. You do not want to begin as a conservative and end up as a speculator. However, there are ways to take profits without selling stock and without increasing market risks. In some instances, taking market risks makes sense, even though it is not always a wise move.

Begin by making distinctions between various investor profiles. A conservative ...

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