Chapter 10

Protecting Your Portfolio with Options

In This Chapter

arrow Protecting assets with options

arrow Hedging a portfolio using options

arrow Watching out for nonstandard options

The world is a volatile place, and trading activity often reflects both political as well as financial developments. For that reason, adding option strategies to both your investment and trading portfolios helps minimize trading stress. Trading is challenging enough, but when market conditions threaten your long-term holdings, the distraction can be downright destructive. Reducing stress is one key to better decision-making for both aspects of your portfolio.

Options offer protection for both portfolios and trading positions. Because a variety of strategies are available to you, you need to have a plan for implementation. This chapter discusses a few protective strategies and the key factors to consider when putting them into practice.

The last portion of the chapter addresses a unique risk that adjusted options pose to investors and traders alike. Adjusted options are those contracts with a non-standard deliverable package due to corporate actions that occurred during the option’s life. We cover adjusted ...

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