Pick the Right Stock

The usual assumption in using any form of analysis is that you identify stocks you would want to buy or hold, and when the news turns bad, you then want to sell shares. With options, however, a stock that shows inherent weaknesses can also signal the time to use options in a different way. For example, if you are convinced that a stock is overpriced and susceptible to price decline, one reaction would be to buy puts. If you're right and the price falls, your puts will increase in value. Thus, the difference between stock investors and options traders is the reaction to news.

Stock investors tend to view bad newsâ
By Michael C. Thomsett
Michael Thomsett is a British-born American author who has written over 75 books covering investing, business and real estate topics.

Copyrighted 2016. Content published with author's permission.

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