right. so, if you are in GPRO, for example, which has rocketed to stardom at a ridiculous multiple, and you are waiting to see if you can squeeze a few more bucks out of it, you could look at the option chain puts, and see how many bets are being placed that the price will fall, those are 'puts', in a given time frame. I'm not thats what will happen, of course..
I've been to a few seminars about it, but never really had a situation when I understood it made sense. You will have to be OK'd for it thru your broker.
My understanding is hazy, but basically you are paying a little for a lot of leverage. You would buy a put option so if your equity (stock) falls below a certain point within a specified time frame, you can sell that option and cut your loss. If you own the stock itself, it is 'covered', meaning you aren't buying (selling) on margin. your total potential loss will only be for the price of the option..it's not like selling short. If you really believe GPRO PPS is going to keep climbing to 120 or so, you hold the stock and buy puts to protect against short term price drops, thus taking some of the volatility out of your strategy, thus keeping you from panic selling..
There are of course advanced option strategies that make my brain reel, but basically, thats what options were designed to do.
Only going long on hot common stock is the riskiest strategy there is, bottom of the market/casino food chain.. but if its working for you, well rock on!! Thats all I got.jmho hth
