Make the most of your stock position. This works for all types of investors.

Hello All,

I am going to be discuss the trick that I use to make the most of my stock position.

First of all you want to be careful and protect your stock investment when a high volatility is anticipated.

You can subscribe to market news channel or stock news feeds using Google Finance, Yahoo Finance or

your broker etc. 

The most conservative and the best way I find to protect my stock is to buy a put option against the quantity

of my stock. I always make sure I'm buying a quantity of 100 for every put that I want to buy to reduce

my total cost on protecting the stock I own. 

Next the times when the stocks plunge / take a deep dive / gap down by few percentage points. This usually happens in extended hours (Pre-market and after hours) or when there is some PR announcement (expected / unexpected). The best example I can take is the earnings announcements every quarter for a given company.

Earnings are announced pre-market (before the market opens 9.30 a.m. EST) or after markets close (4.00 pm EST). 

Usually you would pay 2-3.5% of your total investment on the put option for a given month. During and post earnings announcement the stock may jump up or down a few percentage points. If it jumps up then you 

are making money of your stock and once it breaks even with the cost of the puts you are in the green line.

If the stocks starts taking a dive as a result of the announcement (in case people did not like the earnings result) then the bleeding would usually continue through the session and may lead into the next day trading session. One way to benefit from this is you can set up an "after-hours stop-limit order" to sell your stock

if it starts falling down .For e.g. if AAPL (APPLE stock) at market close is at 350 and on earnings announcement if the stock starts falling lets say u see the selling (and the price dropping) you can set a comfortable stop - limit and sell your stock as soon as possible. Next day when the market opens most likely 

you will have your put gained by a huge percentage (depending on how much the stock drops). 

Next day if it still keeps dropping you can wait and then when you feel you want to take profits you can sell your puts position with profits.

If you had not sold your stock in the extended house then you would have accumulated a loss on your stock which would be compensated by the put you would have bought on your stock position. Selling your stock position earlier prevents an additional loss on the stock and any additional gain on your puts becomes your profit. 

In summary, the key is to have the ability to trade your stock in the extended hours. Options House / Ameritrade do provide this facility to investors. There may be other brokers too. Also, this tactic

does not require any margin privilege on your trading account. So this works for conservative investors too.

The other key thing is to be very attentive during the news announcements and watch the stock price --

a piece of important advice : You should not try to read the earnings report when it is release; let the wall street guys or the BIG Money guys do it and react because thats what most influentially drives price up or down. You only focus on the real time price (in your brokerage account) and follow the herd. 

As they say trade first ask questions later!

Happy trading!

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