Is this the best hedge in the Stock Market Casino?
Say you place a wager on ABX (Barrick Gold) at 28.00 for it to go higher
Now, would it be a good play to have an OPTION for a put of around 28.00? This way if the stock goes higher than I will not exercise my option and take the gains if Mr. Schiff is correct. If my stock gets crushed and the DOW falls to 3,000 and the stock goes to 15.00 then I can at least get in that option and take back some of my losses.
Any opinions, is this like Insurance at a blackjack table? I am not to sure yet on how to beat the options game at the stock market casino (Yes the market is a casino)
One of my favorite plays I think in this Casino game is to put a “PUT” play on companies like GM, C, BAC, GE, PM and have the put for at least six months from now and wait for them to get destroyed. But its a gamble, sort of like poker, baccarat, blackjack and sports betting.
Thank you for those whom can help with the hedge question on having a “PUT” on a stock you own long.
Peace everyone 
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August 27th, 2009 at 1:48 pm
Probably not. A conversion, reversal, jelly roll or box spread is probably the best.
If you think the implied volatility of the option is too low, yes, otherwise, no.
True, but if the stock price stays fairly steady you can also convert a profit into a loss.
No. At a blackjack table you can lose 100% or your original bet plus 100% of your insurance bet. With a long stock plus long put combination you cannot lose 100% of both positions.
Long-term puts on volatile stocks are expensive. It will usually take a large move in the stock price to make a profit if you hold until expiration.
If you want to know more about protective puts you may want to see the discussion about them at
I strongly urge you to learn more about options before you try to incorporate them into your trading strategies. Option trading is at least as much about how volatile the stock price will be as it is about which direction the stock price will move.