Protect your Portfolio

Buy Underpriced Options To Protect Portfolios

If you own any stocks or mutual funds, this is an excellent way to protect your holdings against a major stock market correction.

Here's how it works:

First, look for underpriced, out-of-the-money put options on the futures you own. Recall from Strategy #2, an option is underpriced when its option premium is less than the computed fair value.

	Buy these underpriced put options. If the futures market drops off a cliff, these cheap put options will dramatically increase in price. Your profit on these options will help to offset the loss on your futures. This is a low cost form of portfolio insurance.
	It is a good idea to buy under priced put options that have more than 30 days remaining. This will further minimize time decay, making your insurance even less expensive.