Stock Market Insurance
Stock market insurance is available to anyone that wants to insure their portfolio from a Market Crash. In this article, I’m going to show you how to get started.
It’s important to note that this is not investment advice, guidance, or direction to purchase any securities. It’s an informational post to give you resources to further your financial education.
After reading this post, do not go out and try and implement any strategy I may talk about. That will most likely result in losing money and is contrary to what I want to teach you today. So, if you are intrigued, I will give you links to help you at the end.
Many of us buy insurance for our cars, homes and health. In many instances, you don’t have a choice, especially with cars or homes. If you have a loan on these products, the true owner of the product, the bank, requires you to buy insurance to protect their investment.
However, it’s astonishing that we are never taught to purchase insurance for our most valuable asset we have, our investment accounts.
What if I told you that you could invest $14,422 into a company stock and no matter what happens to that company, you will only lose a max of $1,992? In other words, if the company goes bankrupt and the stock goes to zero, you will get back $12,430 for your shares.
Well it’s possible, so before you post a reply with a bunch of expletives you wouldn’t use in front of your kids, let me show you how.
In this example, we are going to use one of the most popular stock and social media companies out there, Facebook.
As of this writing, Facebook is trading for $144.22 per share. In our example, we are going to buy 100 shares.
So, you contact your broker or log into your broker platform and you purchase 100 shares at the current price of $144.22. Your total investment is $14,422.00.
Next, you tell your broker or click on the options tab in your broker account and you buy a Jan 15 2021 $145 Put option. This Put option gives you the right to sell Facebook at $145 on or before January 15, 2021. The cost, $2,070.
Things Don’t Go As Planned
Now, let’s fast forward one year and three months and Facebook stock has plummeted to an all-time new low of just $15. If you purchased these shares the traditional way, you would be sick to your stomach because your $14,422 investment is now worth $1,500.
But, you didn’t follow the herd. You actually took the path least traveled and paid an additional $2,070 for protection on your investment. So, you could go back into your broker account, or call your broker and tell them to execute your Put option contract.
The broker would say, “Certainly Mr. Cashflow, I will execute that right now.
After the transaction posts, you see $14,500 sitting in your account. That sick feeling you would have had in your stomach is now a feeling of excitement because you beat the odds.
Folks, this is not a fantasy, it’s a reality and something we teach other investors every day. And you don’t need to be a millionaire to do it.
Many have heard of options, but unfortunately it is typically negative. Most will tell you options are risky.
I will tell you crossing the street with a blindfold during rush hour traffic is risky as well.
Well, options trading is the same thing. If you know nothing about options and risk management, and you decide to try and trade them, you are crossing the street with a blindfold during rush hour traffic.
Conversely, if you implement risk management principles to never risk more than 10% of your total account on options trading and you understand how options work, you are now crossing the street in a crosswalk with a sign telling you it’s safe to cross.
Now, let me throw one more bonus at you.
What if I told you there is a way to purchase those Facebook shares at a discount? Well, there is, and it is how I buy all my shares of stock and ETF’s. I never pay retail, I always pay wholesale. And I never buy when the stock or ETF price is at an all-time high. I set the price and wait to be assigned the shares.
If you want to learn more, go to www.learn-stock-options-trading.com. It is a free site that will teach you the basics of options trading as well as introduce you to a community of like-minded people looking to further their financial education.
Don’t wait until the next market crash to wish you had insurance. Do something today to learn how to protect one of your most valuable assets you have.
Thanks for reading and be sure to comment below. Let us know what you think.
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