Retail investor: Market's dropping so I just loaded up on puts to protect my portfolio.


Me: You know you just bought insurance at the top of hurricane season, right?
Retail investor: ...what do you mean?
Me: Fear inflates put premiums. You're paying 3-5x what that same protection cost a month ago, at the exact moment stocks got cheap.
Retail investor: But I need protection NOW. It's falling.
Me: That's the key thing... that panic feeling is precisely why the premiums are crazy. You're paying top dollar for fear relief, not protection.
Retail investor: So what's the move instead?
Me: I'm on the other side of your trade. Selling those inflated puts on great companies I'd love to own cheaper. Your fear is literally my income.
Don't buy protection at the exact moment it costs the most...
Be the insurance company. Sell portfolio secured puts into the storm.
This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.
  • Reward
  • Comment
  • Repost
  • Share
Comment
Add a comment
Add a comment
No comments
  • Pinned