Options Bootcamp 21: Playing Defense

Published on: May 01 2013 by John Critchley

 

 

Everyone knows that the best offense is a good defense. Especially when it comes to your portfolio

Basic Training: Playing defense with options: it’s very important right now!

  • Basic Defense: Protective Puts (full overview in Ep. 3)
  • How do you hedge your position with protective puts?
  • Intermediate Defense: Put Spreads and Ratio Put Spreads.
  • Covered Calls – (full overview in Ep. 4) How do you generate income with a modest hedging impact?
  • The Power of the Collar: combining the put and the call into a beast of an option. This is the favorite defensive strategy of most financial advisors who use options.
  • The pros/cons of repeatedly doing zero cost collars.
  • Volatility Defense: VIX Options/Futures. The myth of VIX’s perfect inverse correlation- there are problems with relying on volatility as your only hedge, i.e. black swans, days when VIX outperforms, etc.
  • The pros/cons of direct defense vs. indirect defense.
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