The point of hedging is to be delta-neutral i.e. no matter where the price goes, you won't be affected much so there is no point hedging with the strike that's equal to the bottom price. The most effective hedging would be with the ATM put but it's expensive so what I would do is hedge with a strike that's equal to a meaningful support level that breaking that the put will provide effective hedging against the drop but if that support level holds, it won't cost too much for the put. IMO
That was going to be my original plan. The problem I hit is that most key resistance and support levels happen a pretty good distance apart. And you're right, the Delta is one of the most significant problems. Originally, buying the Puts at a significant support left, far out of the money seemed like a nice cheap solution. The problem is the premium grows significantly the further out you buy it, so if you arent timing the breakouts/ failed breakouts perfectly your losing a significant amount of profit every breakout or hedges just on time decay alone. Secondly, if it does breakout you can pretty much kiss any premium goodbye. The support level is usually so far away that the far out of the money Put is virtually worthless, especially if you have pushed a strike price higher. The in the money put has it's own challenges. However, I can take into consideration buying less Puts if I factor in its future value at the point it has dropped to that support level far below its breakout value, allowing me to buy fewer to help balance a price equitable to the price of out of the money support level puts. If it does breakout it often comes back a good portion in order to retest its prior resistance level. If one reads the price action and can determine the previous resistance is now solidly a new support they can sell the Puts back with little residual value loss. An expiration date far down the road seems to be the best option. Although the price a far more significant it's time decay holds far better. I'm still debating on whether to use Puts as a viable hedge solution at all, rather than just use a stop. They are a portion of liquidity with a purpose of no actual ROI I must set aside that I could be putting into the actual position on the trade itself while just manually trailing the stop each move up on every significant higher low. I increase my principal, have no worries of how long it takes so no time decay, and the times I lose a portion to a failed breakout and stop out on the trailed stop loss are likely to be less than the amount I lost to time decay and theta losses on the Puts that did breakout while breaking even on the the times the hedge did work. Hope that made sense and sorry I took the long way around while writing it out.
I like diagonal collars to protect some stocks already in gain. Long puts ATM, and then sell shorter term calls. I prefer this if my stock is in decent gain. When initiating positions sometime I start with a regular protective put, if things go well I turn it into a collar and eventually a diagonal collar. Sometime I use ratio and buy some extra OTM puts. It really depends on the underlying range and risk.
What I usually do is I hedge at the same time when I take on a position so that way my position is delta-neutral right from the beginning and it eliminates the possibility of me having to fork over more money to hedge later on when the position is already moving against me. In this case if you are still looking to buy some protective put to protect against some losses, you can, like many posters suggested, sell some options at the same time to recover some cost. You can still use stops at the same time when you buy puts. They are not really mutually exclusive of each other. That way you cut the losses and use the options to just get some profit when the market is going the other direction to hopefully reverse all the losses and turn the trade into profit.