I went long puts.

Discussion in 'Options' started by noob_trad3r, Apr 12, 2010.

  1. To lock in my gains and set up a floor. Things are moving up so quick its kind of scary. Might as well lock the gains in.
  2. ptrjon


    you could have just sold or written calls too. Your strategy works too, but any profit you see on the puts will be offset by your losses in stock.

    I'm personally not a big fan of buying puts when you're long.
  3. Why? Isn't it just the cost of insuring your stock, so to speak.
  4. If you ran the numbers and are happy with the equity curve, good enough.

    Buying options usually means you anticipate a bigger than expected move, or you have some ulterior motive, like needing to hold on for cap gains reasons.

    If you bought puts to protect against the normal drift in price, well that's what options price in, plus a little profit for the writer.
  5. VIX is down so insurance should be cheaper and it does seem people are getting pretty complacent. With earnings season in full force you never know what surprises lurk :)
  6. piezoe


    In my opinion that is not a bad thing to do, particularly with highly volatile issues. Buying the puts will reduce your overall volatility. If the stocks continue to rise you will make money but less than if you did not have the puts, and if the stocks fall you will lose money but not as much as you would without the puts. The puts will, as you say, put a floor under your losses.

    You are taking a conservative approach when you have nice gains. Nothing at all wrong with that!
  7. MTE


    Buying puts to lock in gains and set up a floor is definitely a good idea if you are worried about potential downside.
  8. MTE


    By selling the stock or writing calls he/she would've limited the upside and in case of calls wouldn't have much protection. Buying puts essentially converts the long stock position into long calls, which is a good way to play the potential continuation of the uptrend, while limiting the downside in case of a reversal.
  9. Shhhhh


    Did you buy near month options or futher out? You looking to lock in your entire gain thus paying very high premiums with ATM or even ITM Puts, or just a certain percentage of your gains so you buy OTM puts?

    Hard to tell weather this is a good strategy until you take into account how much you paid for your protection.
  10. Puts are cheap at the moment... so are calls. If you expect the move to go into the tails you'll be better off buying puts, but you'll want to exit them as soon as vols get pumped.
    #10     Apr 13, 2010