Question from Beginner

[randomstu 10]

Hi, I'm new to options trading, and seeking very basic advice.

 

I own 400 shares of SPY currently priced at $250 ($100,000 total). I want a strategy of buying puts that insures the portfolio doesn't lose more than $20K/20% in one year.

 

Say that after I buy puts, SPY drops to $200 (20% loss). I'd want each dollar drop below $200 to bring an expected gain to my puts that would be greater than the loss to the 400 SPY shares.

 

How much should I buy of which particular puts to achieve this goal? As an absolute beginner, I greatly appreciate any sort of direction. I understand that the optimal strategy may require to me to buy puts at regular intervals during the year.

Edited September 22, 2017 by randomstu

[zdo 20]

hi Random.

welcome to TL

 

some basic questions

Are you seeking to passively hedge your position?

If not, to what degree do you seek to actively hedge your position?

 

(

clarifying the terms...

 

‘passive’ completely = hedge/lock value in where it is right now ... no upside or downside.

 

‘actively’ in the extreme = going for hedge that also puts no limits on the upsides ...

 

degrees of ‘actively’ include partially or totally lifting the hedge when not needed, possibly selling premium in addition to just buying it, etc

)