intro to protective put

Don't we all, i am not claiming that there is no risk of loss but the protective put can put you in a situation in which you have zero to negative risk on you stocks.

what exactly is a protective put?
a protective put is 100 shares of stock and a put option the right to sell the stock, usually for the price you paid for it or higher. this is a bullish position. and i prefer to use the leaps for protection on stock. i will use eBay for example as it is one of the stocks that killed me when i was just buying calls on stock. if i would have used this method i would of made money off of it. eBay is at 32.12 and the option to sell in Jan 2010 last traded at 7.40 which costs $740. we now have the right to sell eBay at 35 a share thats 100 shares because its an option so thats $3500. we paid $3212 740 thats $3952. if we sold now we would be at a loss but we now have 100 shares that we can sell a call on. Giving someone else the option to buy the stock. I prefer when the call option we are selling is in a closer month than the put option we own. I also would rather wait a bit till the stock went up and sell the call for the total amount of risk i have on the trade which would be the 3952 minus our 3500 guaranteed buy our put. so that comes out to $452. i would be looking to sell the 40 calls in jan09 for 4.50
now that will only happen if the stock goes way up so i might sell the 35 for what i paid for mine just to get rid of the risk. that is just an example not a recommendation. If it moves down there is a couple of ways you can get rid of that risk. switch your protective put to a closer month buy selling the jan10 and buying and earlier put. profiting of the difference enough to cover the risk. Get rid of risk thats the game not how much we can make. quit letting the big boys sell you those calls and having them expire worthless as they profit off it turn the tables on them with this worry free method.

next how to price options
http://www.squidoo.com/lowbalpricetargets-checkoptprice

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