During our current stock market volatility, discuss how you would use options by providing an example.
During our current stock market volatility, discuss how you would use options by providing an example.
Homework Answers
Protected Put
One of strategies to be used in a volatile market can be that of of a Protected Put.
Protected Put refers to buying a put on a stock you already own.
Eg. Stock of apple is trading at $254 per share. As Apple is a fundamentally sound company many investors have Apple stock in their portfolios. However the recent volatility due to coronavirus is very high, almost all the stock have been impacted.
Protected put refers to buying Put options of Apple stock. Thus incase the stock price decreases, the put value increases, thus it provides a kind of a hedge to our portfolio.
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During our current stock market volatility, discuss how you
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