11 Minute Read

Tackle Today: Options Power #3: Protection

May 6, 2022

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«Protection = Better Control Risk»


Stocks are grappling with a bear market. Many companies have seen their share prices get cut in half. Volatility is raging, and fear is on the rise. It’s times like these that remind us of the value of risk management and the bounty of choices available for minimizing losses using options.

Take the Protective Put, for instance. It’s like an insurance policy. Only instead of protecting your health, it protects your wealth. You can buy puts to protect a single stock position or protect an entire portfolio by purchasing put options on an index like the S&P 500.

And, just like insurance, you can ratchet the cost higher or lower by changing the deductible. In this case, the deductible equals the put strike’s distance out of the money. For example, if you purchased a $90-strike put on a $100 stock, you have a $10 deductible. You’re on the hook for the first $10 loss in the stock. Then the put kicks in and offsets any further damage.

Of course, puts aren’t free. The premium you pay also adds to the potential loss. In the previous example, pretend you paid $2 for the $90 put. Your maximum loss is actually $12 ($10 deductible + $2 premium).

Bottom line: Protective Puts help you define your downside.

Join Coach Gino next Monday night for the Options Success: How to Leverage Financial Markets to Achieve Freedom webinar to learn more.👇

🛑 Options Success Webinar: How To Leverage Financial Markets To Achieve Freedom with Coach Gino Poore | May 9th at 8:30 PM EST on YouTube

Join Coach Gino Poore (a.k.a. The Theta Maker), veteran trader, co-founder, and CIO of Tackle Trading in this exciting webinar where you are going to learn the 3 ways that options trading can transform your life in the financial markets:

① Low Risk, High Returns: That is the true power of options: LEVERAGE. You are going to learn how to unleash this power.
② Generate Cash Flow = Passive Income: How to use the power of options to generate cash flow and compound those gains to achieve Financial Freedom.
③ Protect your Assets: How to use the power of options to protect your assets.

You don’t want to miss it!

Video of the Day: How to Use Put Options as Insurance

Coach Noah explains what a Put Option is, how to and why you should use it as insurance.

Chart of the Day: S&P 500 25 Best & 25 Worst Days

Chart of the Day: S&P 500 25 Best & 25 Worst Days (source: Michael Batnick)
Source: This is Where Dragons Lurk by Michael Batnick

This week’s market mayhem reminds investors that the largest up days and down days nearly always occur in downtrends. According to Michael Batnick, “Of the 25 best and 25 worst days going back to 1993, 47 of them happened below the 200-day moving average.” Green dots = best days, Red dots = worst days. This is one of the major reasons why trading downtrends is so difficult.

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.

Cash Flow Club Replay

If you missed last night’s webinar with Coach Gino Poore where he talked about Analyzing High Volatility and Credit Spread Management or would like to watch it again, check it out here.

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.

Tackle Trading: Financial Freedom is a Journey. Sign up now for a 15-day free trial.

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.

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