roni - buying AAPL puts
What strike and timeframe would you be thinking about?
I think buying puts can make good sense if you want to hold a stock long term, and you need protection in the short term to give you the confidence to hold on.
But, it may not be cheap, and the timeframe can get you. With AAPL ~ $55.65 (yesterdays closing #'s), the July $52.50 puts are going around $.90, and the AUG $52.50 are around $1.65.
The trouble with July, is if the stock drops to say, $53 on 7/21, your put money did nothing, and you no longer have any protection. You can spend more for the AUG, but then again, if AAPL hovers around 53, you 'lost' about $2.50 in AAPL and another $1.65 in the put.
You can drop the strike down and consider it cheap 'catastrophe' insurance. Depending on where AAPL goes, any of these ideas may work, or it may just eat into your profits - like any insurance product. I have used puts this way, and it can help the 'sleep at night' factor. But, I try to stay diversified enough that that is not too much of a worry anyhow.
-KCMW
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