How To Use A ‘Collar’ To Protect Your Portfolio Against Losses
How can we protect our portfolio against losses when stocks are in a correction? Or even if stocks are not currently in a correction? There are many schools of thought on that.
One relatively straightforward way to protect open stock positions is to buy Put protection. Puts are option contracts that have an inverse correlation to price. If the shares go down in price, the value of the Put will increase, thereby providing some offset to losses in the underlying stock.
A Collar can be an effective strategy to ensure against significant losses. A common way to offset the cost of purchasing protective Puts is to implement a Collar strategy using options.
The post How To Use A ‘Collar’ To Protect Your Portfolio Against Losses originally appeared at TheTechnicalTraders.com.
Category: Options Trading Strategy
