Now that the market has hit 4 year highs, and many high flying stocks are also at similar levels, it may be a good time to protect your profits. 5)   Put Options increase in value when the stock goes down, and this is why Put Options are the ultimate protector of your stock. 6)   Figure V shows the Ferrari plan (100 shares of AAPL and 1 Option contract which is equivalent to 100 shares). Put Options provide the ultimate protection on the downside, while preserving your ability to make profits on the upside. Put Options explained in simple terms will give you an idea of why they are the ultimate protector for stocks you own – so let’s dig into the nuts and bolts of how Put Options work.


The 700 strike price Option will be worth 0 in 95 days if AAPL price is above 700 on the day of expiry. All stocks, ETFs, commodities, Indices and other securities mentioned in our courses are for educational and illustrative purposes only.
The Cadillac Put Option would be worth $260, so your net gain would be $34 (260 – 200 -26).
The Ferrari Put option will make a profit much before and much more than the Cadillac Option, which will make much more than the Kia Option.
Similarly, the Cadillac Option at 660 will be worthless if AAPL price is above 660 on the day of expiry.


You pick your protection timeframe shown in Figure I (The number in brackets is the number of days until this Put Option expires). This is just like buying car insurance for a year, but you did not have an accident or claim of any sort, so your Option (insurance policy) expired worthless.



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