Protect Those Gains
Though the market is clearly in an uptrend and volatility seems to be under control, it would be foolish to ignore global systemic market risk today. Now is not the time to be swinging for home runs but for trying to hit singles and doubles. Some simple option strategies are ripe for tidy gains, and option writing is one way to accomplish this.
Many investors are sitting on gains in 2012, and they can be protected by selling put and call options. For example, Netflix (NFLX) shares were trading for about $65 in December. They are now sitting at $118, and while shares have room to climb higher, it's not a bad idea to protect gains if you already bought in. You can start by selling a call to help lock in premium. The June 2012 $130 calls can be sold for $12.50. If shares touch $130 before expiry, your shares are called away and you've sold the stock for $130, plus you've pocketed another $12.50 a share by selling the call. Conversely, if markets turn volatile and shares decline, the $12.50-per-share premium helps mitigate any decline....320 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.
Already a Subscriber? Please login.