Series 66: Hedging With Protective Puts And Calls

Hedging With Protective Puts and Calls

Suppose you bought 1,000 shares of Apple stock months ago at $400 per share and the stock has since climbed to $500. You want to keep the stock, because you like Apple and think its price will continue to rise, but at the same time, you don’t want to risk losing what you have gained. You can hedge your risk on a long position by buying a protective put. In the same way that you buy insurance for protection, you buy a put for protection.

To protect your A