Tackle Today: Portfolio Protection Principles | Tackle Trading
≈ Paper Trading Puts≈
Say you want to buy a protective put. Maybe you’re purchasing it on a single position, or perhaps you’re acquiring it on an Index ETF like SPY to protect your portfolio. In either case, you must necessarily decide which strike price and expiration to use.
When it comes to strike selection, I like to use an insurance analogy-the higher your deductible, the cheaper your premium. In the case of puts, your deductible is the distance OTM. If you buy a put that’s 5% OTM, then you have a low deductible, but the premium will be higher. If you buy a put that’s 10% OTM, then you have a high deductible, and the premium will be lower.
In the Bear Market Survival Guide, we suggest buying puts that are 10% OTM. You can move it closer or further away, however, depending on your preference.
Pinning down which expiration to use depends in large part on the desired length of protection. Are you buying insurance for a specific event, such as earnings? Or are you buying it to own for months on end? In the latter case, I care much more about time decay and thus favor buying long-term protection. In the Bear Market Survival Guide, we suggest using one-year puts.
The best way to understand how protection works is to try it in a paper account. Consider this your nudge to do so.
And don’t forget about our amazing July 4 thIndependence sale going on now. We have most of our products on sale in our bi-annual sale. Check out more here: https://tackletrading.com/store/pro-campaigns/financial-independence-day/
Chart of the Day
Bond Yields Break Support
Video of the Day
Buy One Hold One Dump One
Coach Greg analyzes 3 stocks from the Insurance sector, Travelers, Allstate, and Progressive, and asks the coaches which one they would Buy, Hold, and Dump, in this segment from Thursday’s Halftime Report
Today’s line up
Traders Lounge 11 AM EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
The Coaches Show 8:30 PM EST
This is our weekly MasterMind group. Join the coaches tonight, 8:30pm EST to discuss the markets and help you prepare for the week.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.
Financial freedom is a journey
Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.
Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.
All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.
Originally published at https://tackletrading.com on July 6, 2021.