Market’s been going up and down. The volatility has some people worried about having a stock that they have a big profit in and they don’t want to lose that profit if the market drops.
If this sound like you, the best tip I could give you to lock in some gain without selling the stock is to protect yourself with insurance.
So what is that insurance?
Let’s say you own NVDA and it’s come up to 139 and then it drops to 132… and you’re worried it could go even lower.
All you need to do is buy one put option for every hundred shares of the stock that you own. Expiration can be about 30 days out.
Now as far as strike prices, buying closer to the money will cost you more, but you’ll be more protected in case of a drop.
Buying further out from the money (lower strike prices) will be cheaper, but you’ll have to absorb more of the loss if the stock does drop.
Either way, if NVDA’s price suddenly drops, you can choose what to do: If you want to put the stock to someone at the strike price of your option, you can just exercise your option.
If you still want to hang on to the stock, you can just sell the put option, which will have skyrocketed in value. That should offset some of the paper loss, which will preserve the gains you had without having to sell the stock.
Trade well,
Jack Carter
P.S. Speaking of NVDA…I just spotted a huge flood of money going into this stock that I call NVDA’s baby brother. Check it out.