Comments on: “Millionaire’s Crash Insurance: The Ultimate Safety Net” http://www.stockgumshoe.com/2008/02/millionaires-crash-insurance-the-ultimate-safety-net.html Frustrated or intrigued by email teasers from investment newsletters and advisers? We solve them and track their performance here ... so stick around, participate and subscribe (it's free)! Sat, 21 Nov 2009 05:52:09 -0600 http://wordpress.org/?v=2.8.4 hourly 1 By: ja http://www.stockgumshoe.com/2008/02/millionaires-crash-insurance-the-ultimate-safety-net.html/comment-page-1#comment-1540 ja Thu, 28 Feb 2008 23:43:44 +0000 http://www.stockgumshoe.com/2008/02/millionaires-crash-insurance-the-ultimate-safety-net.html#comment-1540 I am talking about marketfn.com I am talking about marketfn.com

]]> By: ja http://www.stockgumshoe.com/2008/02/millionaires-crash-insurance-the-ultimate-safety-net.html/comment-page-1#comment-1539 ja Thu, 28 Feb 2008 23:42:47 +0000 http://www.stockgumshoe.com/2008/02/millionaires-crash-insurance-the-ultimate-safety-net.html#comment-1539 I did subscribe and they had all wins about 5-6 in 6 weeks but the wins were small. Are they still good? I did subscribe and they had all wins about 5-6 in 6 weeks but the wins were small. Are they still good?

]]> By: StockGumshoe http://www.stockgumshoe.com/2008/02/millionaires-crash-insurance-the-ultimate-safety-net.html/comment-page-1#comment-1512 StockGumshoe Tue, 26 Feb 2008 16:48:09 +0000 http://www.stockgumshoe.com/2008/02/millionaires-crash-insurance-the-ultimate-safety-net.html#comment-1512 If you mean selling calls against your owned stock, that's more of an effective "smoothing" exercise that gives you some income than it is real downside protection, which isn't to say that it's not also an effective strategy for some people. Selling calls provides income and reduces your cost basis a bit, but doesn't protect you very much from significant declines, or let you profit from declines. You only get the money you receive from selling the call, so if you sold a GOOG $600 call for September of this year for $10 that really only gets you $10 per share no matter how far the stock might drop (and if the shares go over $600, you're essentially forced to sell at $600 or buy the call back at a loss). As we can see from the example that I used yesterday, which was just lucky (the Gumshoe's Magic 8 Ball is not that effective at soothsaying), the put goes up as the stock goes down -- so that September $450 put is now worth almost $50 after being worth about $30 yesterday, which helps to at least partially cushion the blow you might have received from seeing your GOOG shares drop by $35 or so. Of course, this also creates more decision points -- do you hold your put through expiration and treat it as real insurance that remains a backstop on your portfolio, or do you sell it to book a profit after the stock falls like GOOG did today? If you sell it, do you then want to buy more insurance by getting a new put at a different price point? Plenty of choices for obsessive compulsives to churn over. If you mean selling calls against your owned stock, that’s more of an effective “smoothing” exercise that gives you some income than it is real downside protection, which isn’t to say that it’s not also an effective strategy for some people. Selling calls provides income and reduces your cost basis a bit, but doesn’t protect you very much from significant declines, or let you profit from declines. You only get the money you receive from selling the call, so if you sold a GOOG $600 call for September of this year for $10 that really only gets you $10 per share no matter how far the stock might drop (and if the shares go over $600, you’re essentially forced to sell at $600 or buy the call back at a loss). As we can see from the example that I used yesterday, which was just lucky (the Gumshoe’s Magic 8 Ball is not that effective at soothsaying), the put goes up as the stock goes down — so that September $450 put is now worth almost $50 after being worth about $30 yesterday, which helps to at least partially cushion the blow you might have received from seeing your GOOG shares drop by $35 or so.

Of course, this also creates more decision points — do you hold your put through expiration and treat it as real insurance that remains a backstop on your portfolio, or do you sell it to book a profit after the stock falls like GOOG did today? If you sell it, do you then want to buy more insurance by getting a new put at a different price point? Plenty of choices for obsessive compulsives to churn over.

]]> By: G IMBURG http://www.stockgumshoe.com/2008/02/millionaires-crash-insurance-the-ultimate-safety-net.html/comment-page-1#comment-1511 G IMBURG Tue, 26 Feb 2008 16:47:31 +0000 http://www.stockgumshoe.com/2008/02/millionaires-crash-insurance-the-ultimate-safety-net.html#comment-1511 A note for Jackie.Yes, however, you may not make as much money if the stock goes south because owning a put trades on premium whereas your sale of calls limits your gain to one price received. A note for Jackie.Yes, however, you may not make as much money if the stock goes south because owning a put trades on premium whereas your sale of calls limits your gain to one price received.

]]> By: Jackie http://www.stockgumshoe.com/2008/02/millionaires-crash-insurance-the-ultimate-safety-net.html/comment-page-1#comment-1510 Jackie Tue, 26 Feb 2008 16:07:19 +0000 http://www.stockgumshoe.com/2008/02/millionaires-crash-insurance-the-ultimate-safety-net.html#comment-1510 Would selling the calls have the same effect and give you more money? Thanks for the opportunity. Jackie Would selling the calls have the same effect and give you more money?

Thanks for the opportunity.

Jackie

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