Protective Puts: Tips and details?

Discussion in 'Options' started by Luto, Mar 13, 2008.

  1. Luto



    I am seeking suggestion for a newbie to options.

    I have has several Short position that are about 80% of target, only turn against me. I have been trimming positions(profits), taking stops etc, but want to explore using protective puts also.

    I want suggestions on what to look for in selecting contracts.

    Obviously the price to profit ratio seems relevant but what else.

    Should I always go for in or out of the money contracts?

    Should Time values, Implied voltility, Specific greeks?

    Thanks in advance,
  2. Best to use stop loss orders. In protective puts, you start in negative numbers, your first profits go away to cover the put price.

    IMO protective puts are only for financial institutions (mutual funds and banks) who can't get out of the market in bear markets, due to legal regulations.