BlaineTarr
07-22-2014,
I have heard of people using puts to protect their long positions. However, I haven?t found any good information on how, or even if it is a good idea. I recently got burned by MNGA on an overnight position where they diluted in the premarket and by the time the market opened my shares were down almost a dollar.
I was fortunate that I wasn?t caught in the recent PLUG dilution, but I was going to take a position, but my entry price was missed otherwise I would have been caught.
That got me to thinking that if I had bought puts to go along with my long position that I might have at least limited my risk or maybe made a profit.
My questions are:
Is this a viable strategy?
Is it common for traders to do this?
Does anyone have any suggestions on how best to employ this strategy? 1:1 Long vs. Short or some other ratio? Would the rules of choosing the strike price be any different? I.e. choosing a strike price in the money or at the money?
Your wisdom is appreciated!
I was fortunate that I wasn?t caught in the recent PLUG dilution, but I was going to take a position, but my entry price was missed otherwise I would have been caught.
That got me to thinking that if I had bought puts to go along with my long position that I might have at least limited my risk or maybe made a profit.
My questions are:
Is this a viable strategy?
Is it common for traders to do this?
Does anyone have any suggestions on how best to employ this strategy? 1:1 Long vs. Short or some other ratio? Would the rules of choosing the strike price be any different? I.e. choosing a strike price in the money or at the money?
Your wisdom is appreciated!