Introduction to Trading and Investing with Options (Collection)

2. Puts, the Other Options: The Overlooked Risk Hedge

Most investors are optimists. They assume their stocks are going to rise in value, starting from the moment they invest. In fact, many think of their basis price as the zero point of the investment, and prices are going to move upward from there. The reality—that the price you pay is part of a never-ending give and take between buyers and sellers—is that prices can move both up and down. For many, this presents a problem. What if the price does go down? Doesn’t that mean you lose money? No. With options, you can profit in any kind of market, whether stock prices rise or fall, and even when prices don’t move at all. Put-based strategies can limit losses, protect paper profits, and combine ...