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Real-Money Stock Picks / Messed-Up Expectations Portfolio


Subject:  Re: Announcement of upcoming trade Date:  2/4/2014  12:11 PM
Author:  BrianMotleyFool Number:  1021 of 1275

>> That's why the correct hedge for a put going badly against the seller of the put is to short the stock as it crosses the strike price on the way down. Of course, one cannot know ahead of time that this will be needed, so maybe the short wouldn't be opened until $200 (using this example), so $30 of the $115 loss would have been realized, but still better than taking the full $115 loss as I did.<<

Just a word of warning - be very careful with this hedging strategy.

It works well if the stock continues moving downward in price, but exposes you to all sorts of pain if the stock reverses. In this case, you would be expo