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Options Trading for the Institutional Investor: Managing Risk in Financial Institutions by Michael C. Thomsett

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10. Option Strategies in Down Markets

Some options moves qualify as conservative strategies, as long as the purpose is to manage the portfolio rather than to simply speculate. You can use long puts or calls to manage price change, and short puts (with their limited risk) present great opportunities, as long as they are used solely when you would be happy to acquire more shares of the underlying stock. This chapter provides a conservative context to these ideas, explains how to evaluate your stock positions when prices have fallen, and examines options strategies to reduce market risk.

The chronic problem every investor faces is the inevitability of cycles. The stock market experiences these cycles in numerous ways. The severity and duration of ...

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