TJ 153: Protective Options

Join Tackle Trading's Noah Davidson for a discussion of protective options from Tackle Trading's Cash Flow Club. Options are more than just cash flow generators. While they do indeed do that well when you're the seller, they also act as insurance to the person buying the option (provided the buyer knows what they're doing). Protective options allow a trader to hedge against price volatility for a security or even repair a trade that's gone badly if implemented correctly. Puts and covered calls do generate cash at the cost of capping the maximum amount of profit you can pull from a trade before being exercised by the buyer of the put or call. Done correctly, selling such options also have a high probability of success in generating the expected cash. ...and even if the put or call is exercised, you get the money from the sale all the same to be reallocated elsewhere in your portfolio. However, calls and puts can also help repair trades that have gone badly, lowering the break even point for the trade or occasionally bringing a bad trade back into being a good trade when properly executed. If you'd like to join in on Cash Flow Clubs in person in the future, join Tackle Trading and you'll be able to see all the charting and examples, too! You can join right here!