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Put Option Strategies for Smarter Trading: How to Protect and Build Capital in Turbulent Markets by Michael C. Thomsett

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3. Profit-Taking Without Selling Stock: An Elegant Solution

The dilemma every stockholder faces is timing. When should you take profits? Does it even make sense to sell appreciated stock given the positive attributes of the company (such as high dividends, strong fundamentals, excellent growth forecasts)? The temptation to take profits when they are earned can be very enticing.

This situation occurs when, for a variety of reasons, stock values jump and reach new highs, for reasons you cannot identify. Or even if you know the reasons, the extent of the price increase is not justified. For example, if a company beats earnings estimates for a quarter by one penny and the stock jumps 10 percent, does it make sense? You know that chances are high ...

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