The latest market rally has left many equities in an overbought state and market madness states that profits will be taken in the near future.
Profit taking is almost certain with any market pullback and history shows a September market correction of about 1% so a correction is almost inevitable. With the state of the economy a severe correction is a possibility and it is now time to protect yourself.
Fortunately you have two options, sell outright and take your profits or buy some PUTS at a month and strike price you are comfortable with to protect against any unforeseen radical market correction. I would recommend December to get through most of the 4th quarter earnings.
With the recent rally a profitable strike price should be available. Many premiums are around 5% of the stock price, inexpensive but don’t forget to factor that in as a deduction of your expected profit return.
Happy Trading
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