From Nasdaq: 2024-04-25 11:44:02

The second quarter is bringing major post-earnings moves from tech companies like Meta Platforms (META), Spotify Technology (SPOT), and Tesla (TSLA). Investors are bracing for the Federal Reserve’s interest rate decision, adding more volatility. Options can help traders protect profits amidst this uncertain landscape.

Protective puts offer a way for traders to safeguard their investments and limit potential losses in case of a significant downward move. By locking in a selling price for shares, protective puts can provide a safety net during volatile periods such as earnings releases.

While the goal of a protective put buyer is to mitigate risk and potentially offset the cost of the option, it’s crucial to choose the right strike and options series based on personal risk tolerance. Options premiums tend to be inflated before events like earnings, impacting the cost and effectiveness of protective puts.

Factors such as time value play a significant role in the cost of protective puts, with shorter-term options costing less but offering less protection compared to longer-term options. Effective risk management and strategic decision-making are key when utilizing protective puts in anticipation of market-moving events.



Read more at Nasdaq: How to Utilize Protective Puts During Earnings Season