✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf
in all the videos regarding options or how to use options as insurance this/your video is the most educative i like that you share how much the option initially cost... now i understand what ive been trying to understand!!!
Why would the put be automatically exercised if it is ITM at expiration? I assume the definition of 'put' is that you have the right but not the obligation to sell the stock.
Great video, I have however one question: Why is this preferable over a single long option? When I am purchasing the call option my downside risk is also "hedged"/limited by the prime of the option while my upside is unlimited and leverage... In the end I am ending up with the same scenario but with less capital and trading cost involved?
Great question! Actually, your head is right where it needs to be. A protective put (long stock + long put) is actually the SAME as buying a call at that same strike price. For instance, if you bought 100 shares of stock at $105/share and bought the 95 put at the same time, that position (long stock + long put) is equivalent to simply buying the 95 call. In both cases, you lose the maximum amount of money if the stock is
Yes but this is if you want to own stock long term. If you buy a call option it could expire worthless before it could go into the money and you won’t be able to collect dividends.
@@chevon1920 I would also say, as far as I understand having long stock + long put then at the day of expiration it would be the same profit or loss as if you bought an equivalent long call. But with the difference that when the stock price is higher than breakeven the long call will be sold with profit, whereas with the long stock + long put you will be in 'virtual' profit and you could just sell the long stock with that profit but you can also keep it for long term. (You could then for example protect it with a new long put with higher strike price). However with the call after it's expiration you could also just buy the stock or another call which could then be similar again to long stock+long put. But yes, I guess if the stock pays a dividend you won't get that with a call...
Isn’t it true that protective put strategy provides maximum profit, amongst all other Futures and options strategies, for some weeks of investing, since the Breakeven can be achieved within weeks ? Or is there any other strategy to make more profit ?
if the idea of put is exact meaning for every share of a stock i buy it an extra amount and if that stock rose almost 70% in a month time im basically going to be making 60% of that profit, and if that stock falls almost 40% during the month it will only officialize my loss in the 10% radius... im fine with that because ive entered stocks that by the end of the month they rose almost 80% but in the week i enter them they fall 60% and since i didnt have insurance/option put on them i almost felt like it get riskey so i jump out once i see them fall below 10% BUT i feel if i put an option insurance on them i would have the gut to ride them through their 60% falls just to cash out when they finally rise by the end of the month to almost 80 to 200%
Do I need to sell stocks with the married put together? Could I sell the shares first at a relatively high price and then sell the put if I feel the stock is still going to drop.
Thank you for the explanation. I can se why this wouldn't be a great strategy on it's face... However, what about setting up a nested trade with say a bear call spread using shorter term options than your long put?
It can be a very costly strategy over time. What you're referring to sounds like a collar constructed with a call spread instead of a short call. You can surely sell a near-term call spread against your longer-term put. However, that short-term call spread is going to have to be very close to the current stock price for you to get any premium out of it. With that said, selling a call spread instead of a short call will leave you with more profit potential should the stock increase.
@@108987 Hey Patrick, can I ask you a question, why is Max Loss = [Stock - Strike + premium]? I would have thought max loss is just assume stock depreciates to zero. then Max loss should just be [Strike - premium]? Thanks!
How about this strategy when you already own shares in a stock that have increased about 30% already. Wouldn’t this strategy be beneficial in being able to sell the shares at the current price if the price tanks ? Wouldn’t you want to exercise the option or let it expire so that your profits on the stock get realized in case the shares fall rapidly and you are unable to sell them in time. If you choose a strike price that is considerably lower than the current price does the stock price have reach that level before you are able to exercise the option and sell the shares ?
![[UA] Eternal Fire проти NAVI | EPL Season 20 Malta](http://i.ytimg.com/vi/chvlsDygrZM/mqdefault.jpg)
✅ New to options trading? Master the essential options trading concepts with the FREE Options Trading for Beginners PDF and email course: geni.us/options-trading-pdf
Thanks for content! One of the simplest yet most efficient strategies...
in all the videos regarding options or how to use options as insurance this/your video is the most educative i like that you share how much the option initially cost... now i understand what ive been trying to understand!!!
This explanation is beyond amazing!
Thanks!
Fully agree!!!!!
Great explanation.Thank You!
Why would the put be automatically exercised if it is ITM at expiration? I assume the definition of 'put' is that you have the right but not the obligation to sell the stock.
What time period do you recommend and delta?
How to buy a Protective/Married put on one go on TD ?
What would you propose to protect a whole portfolio of 15-20 stocks? Different puts for every stock or is there an easier alternative? Thanks a lot!
Great video, I have however one question: Why is this preferable over a single long option? When I am purchasing the call option my downside risk is also "hedged"/limited by the prime of the option while my upside is unlimited and leverage... In the end I am ending up with the same scenario but with less capital and trading cost involved?
Great question! Actually, your head is right where it needs to be. A protective put (long stock + long put) is actually the SAME as buying a call at that same strike price. For instance, if you bought 100 shares of stock at $105/share and bought the 95 put at the same time, that position (long stock + long put) is equivalent to simply buying the 95 call.
In both cases, you lose the maximum amount of money if the stock is
Yes but this is if you want to own stock long term. If you buy a call option it could expire worthless before it could go into the money and you won’t be able to collect dividends.
@@chevon1920 I would also say, as far as I understand having long stock + long put then at the day of expiration it would be the same profit or loss as if you bought an equivalent long call. But with the difference that when the stock price is higher than breakeven the long call will be sold with profit, whereas with the long stock + long put you will be in 'virtual' profit and you could just sell the long stock with that profit but you can also keep it for long term. (You could then for example protect it with a new long put with higher strike price).
However with the call after it's expiration you could also just buy the stock or another call which could then be similar again to long stock+long put. But yes, I guess if the stock pays a dividend you won't get that with a call...
Great question. Keep it simple with less cost. I was wondering about the same thing. Just purchase a call at a lower strike price. Much, much better.
Isn’t it true that protective put strategy provides maximum profit, amongst all other Futures and options strategies, for some weeks of investing, since the Breakeven can be achieved within weeks ? Or is there any other strategy to make more profit ?
This is such a good explanation, thank you.
Thanks for the comment and you're welcome!
Can I buy a put to protect my leap option?
if the idea of put is exact meaning for every share of a stock i buy it an extra amount and if that stock rose almost 70% in a month time im basically going to be making 60% of that profit, and if that stock falls almost 40% during the month it will only officialize my loss in the 10% radius... im fine with that because ive entered stocks that by the end of the month they rose almost 80% but in the week i enter them they fall 60% and since i didnt have insurance/option put on them i almost felt like it get riskey so i jump out once i see them fall below 10% BUT i feel if i put an option insurance on them i would have the gut to ride them through their 60% falls just to cash out when they finally rise by the end of the month to almost 80 to 200%
Do I need to sell stocks with the married put together? Could I sell the shares first at a relatively high price and then sell the put if I feel the stock is still going to drop.
Yes!
Very informative!
Thank you for the explanation. I can se why this wouldn't be a great strategy on it's face... However, what about setting up a nested trade with say a bear call spread using shorter term options than your long put?
It can be a very costly strategy over time.
What you're referring to sounds like a collar constructed with a call spread instead of a short call.
You can surely sell a near-term call spread against your longer-term put. However, that short-term call spread is going to have to be very close to the current stock price for you to get any premium out of it.
With that said, selling a call spread instead of a short call will leave you with more profit potential should the stock increase.
Very well explained.
Thank you, Samuel!
Can you “marry” a put, with a call if it hasn’t been exercised yet? Or do you have to already own the shares?
Yes this is called a straddle or a strangle depending on the strikes. However you should never really buy a strangle only sell them.
Is there a difference between put options and protective put options?
@@108987 Hey Patrick, can I ask you a question, why is Max Loss = [Stock - Strike + premium]? I would have thought max loss is just assume stock depreciates to zero. then Max loss should just be [Strike - premium]? Thanks!
How about this strategy when you already own shares in a stock that have increased about 30% already. Wouldn’t this strategy be beneficial in being able to sell the shares at the current price if the price tanks ? Wouldn’t you want to exercise the option or let it expire so that your profits on the stock get realized in case the shares fall rapidly and you are unable to sell them in time. If you choose a strike price that is considerably lower than the current price does the stock price have reach that level before you are able to exercise the option and sell the shares ?
It really helped me to understand!!!!!!
Awesome! I am glad! Thank you for watching.