How to buy married put when volatility is through the roof?

Discussion in 'Options' started by turkeyneck, Sep 16, 2008.

  1. I own some bank stocks in my buy and hold account. I want to get protected on the downside but the puts now are insanely expensive due to the huge jump volatility. Is there any strategy to make the puts cheaper without going DOTM?
  2. Insurance costs more when you want to insure a higher risk. That is the natural order of things.
  3. You can purchase a put spread. For example, if stock is $100, instead of just buying the 90 puts you can buy the 90 puts and sell the 80s or 70s, etc. It won't give you the full protection of an outright put purchase but it will give you some protection and reduce your cost of protecting the position.

  4. If you have a few bank stocks look at puts on ETFs such as XLF which cover the financial sector. All depends which banks you have of course but might be better to use thsoe puts than buy puts for each bank stock.
  5. Try a collar. Sell a higher priced call to finance the cost of the put. Often, you can do it for no cost if you go out a number of months.

    This limits your upside also, but those are the breaks. Always a trade off.