Protective PUTS
I’m Meta Matt, Director of Education and welcome to PB University LITE! This is a 50 Class Trading 101 Series geared towards both new and veteran traders alike! We go over everything from Trading Psychology, Technical Analysis, and Options Trading to Commodity Trading, Forex, and more!! This 50 Class series is not designed be taken in order, it is instead designed for traders to browse and pick which classes interest them. I will include the list of classes at the bottom of this page.
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Options trading can be a powerful tool for managing risk, but it's important to understand the potential risks involved. Some of the key risks in options trading include the possibility of losing the entire premium paid for an option, the risk of a sudden and dramatic change in the stock price, and the risk of time decay.
To manage these risks, it's important to have a clear understanding of the underlying stock, to use options in a diversified portfolio, and to have a well-defined exit strategy. There are some advanced strategies that Traders use to manage risk.
We already talked about Covered Calls and Spread Trading in our previous PBU LITE Classes, so I won’t get into those. This class we will be starting with Protective Puts
A protective put is a strategy in which a trader buys a put option on a stock they already own. This provides a hedge against a potential drop in the stock price.
Let's say I own 100 shares of $XYZ stock, which I bought at $50 per share. But I am concerned that the stock price may drop in the near future, so I decide to use a protective PUT strategy. I buy one PUT option with a strike price of $45, which gives me the right to sell my $XYZ stock at $45, regardless of the current market price. So for example if the stock drops to $30, I can still hold onto my shares up till expiration, knowing that as long as the stock stays under $45 I have the right to sell my shares at $45. It’s kind of like a Stop Loss on steroids.
Some traders can also use this method to sell their PUT for profit to offset their losses on the stock, if they decide to sell it for a loss down the line.
PB University LITE Class List
1) Trading Terminology
2) Stock Market Indices
3) Common, Preferred, and Penny Stocks
4) Diversification of Assets
5) Fundamental Analysis Made Easy
6) Technical Analysis Made Easy
7) Risk Management In The Market
8) Portfolio Management
9) How To Follow Market News
10) Trading Psychology
11) Options Explained
12) The Greeks In Options Trading
13) How To Short Sell Options
14) Covered CALLS
15) Spread Trading
16) Online Brokers for Options Trading
17) Implied Volatility Calculators & Tools
18) Protective PUTS
19) Iron Condors
20) Straddles
21) Reading Level 2
22) Taxes
23) Trading Psychology Techniques
24) The Art Of Trading
25) Becoming A Jedi In The Stock Market
26) Futures Trading Explained
27) Commodity Trading 101
28) Regulatory Environments
29) How To Become A Millionaire
30) $100K In 100 Days
31) Wash Sale Rule
32) Behavioral Finance Part 1
33) Behavioral Finance Part 2
34) 5 Charting Indicators
35) Fair Value Gap
36) Insider Trading and Market Manipulation
37) Stock Chart Types
38) Moving Averages 101
39) Base vs Precious Metals
40) Electricity Trading 101
41) Trading Brokers 101
42) 5 Trading Strategies
43) 85% Trading Rule
44) Are Win Rates A Scam?
45) Futures Trading 101
46) ATR Indicator Strategy With The Greeks
47) MACD Indicator 101
48) Bollinger Bands Indicator 101
49) Wedges, Triangles, Flags and Pennants
50) RSI Divergence 101
