Skip to main content
No. of Recommendations: 2
Does that sound about right?

Yes, except that the puts need not expire worthless. The at the money option premium decays as the square root of the time to expiration. So if you are just trying to hedge your total holdings, buy a put that is at least 2x the time to the earnings report. Then you are wagering only with 25% of the premium. You will lose some for the price going up, of course, if the news is good, but will be able to recover a substantial portion of the premium by selling the put on the news.

Unfortunately, all I can do as far as options are concerned is sell covered calls.

That's odd. The normal rules in IRAs should allow you to buy either puts or calls. Buy-writes are a well known conservative investment strategy that IRA rules also allow. The usual problem is that a broker won't let you sell a cash-secured put even though it is the same (barring some fees) as a doing a buy-write. There are, however, several brokerages that will allow you to do this in an IRA account (possibly after satisfying some experience requirement).
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.