One of the key companies in the market – for market sentiment as well – reports after hours today: $AAPL and will certainly produce a lot of winners and losers. I have a 3/4 position in the long-term account and I own the October 26 weekly 625 Put (paid 17.25 on 10/19).
I don’t typically like to pay outright for option premium, but here are the 2 scenarios that can play out for me:
1) Stock goes up making the Put position less valuable, sell it for whatever I can on Friday (tomorrow, it expires). Enjoy the gains on the long stock position.
2) Stock goes down. Oops. Will be thankful for the Put as it could have immense value – and will offset the loss on the stock positions.
Now, I want to visit item #1 for a bit. If the stock does go up, and continues on Friday, one of the strategies is to sell Call premium against the long stock position. You may even be able to sell enough to cover the cost of the initial Put – and you would have held the gains on the long stock position as well.
Not a bad deal at all.