I hate when people say being in the Stock Market is like playing in the Casino. Where is the relationship in that.
Is it the strategy or the loss of cash? They both need a strategy, and yes they both can lose money I get it.
What your not paying attention to is you own the stock even though it’s options. And if you own the stock out right and it drops; you can buy options to support your stock when it falls for any lost.
Let me explain, if you own a stock for $10; and it drops, you would buy what is called a “PUT” at $10, so as it goes down you make money… that “PUT” is going to make you money. You sell it when it starts to go back up; then buy a call to again make money as it returns to $10. All while holding the original stock.
This is something your broker does for you, but get this, and this is why I believe people should manage their own money. Lets say your $10 stock drops by a dollar, your broker has a “PUT” on it to make himself some money on top of what your already paying.
Should you walk in to cash out your stock…. he is not going to give you $10 even though his “PUT” that’s making money to balance your loss…. He will cash you out for $9 a share less his commission.
Is that fair? Don’t get me wrong he is buying that “PUT”, but you have him there to hold your money on that level.