Cake Financial's The Slice Episode 36: STX, OGZPY, SJL, TWM, EFZ Favorite

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1,102 views • Uploaded October 10, 2008

madmarv

madmarv (7:19)

1 year ago 0 + -

Do you guys cover options on your show? The hedging strategies that I've been hearing about focus on buying puts rather than shorting or taking long positions in ultra short funds.

cakefinancial

cakefinan... (7:19)

1 year ago 0 + -

Hi MadMarv-

This is Steve. Thanks for your note and for watching the show.

We are currently working on adding options to Cake. Once we do, we will be covering different strategies on the Slice as those positions bubble up.

I also wanted to take a second to comment on the differences between the strategies you listed above. Buying a put option gives you the right to sell the underlying security at a strike price at some date in the future. You pay a small fee to do this and if the strike price is never met, you are not out any additional capital. It is an option but not an obligation. In other words, if your strategy fails to materialize, your downside is limited.

In taking a short position, it is still a bet that the stock will decline, however, your downside is almost unlimited until you cover the short and buy the underlying security.

Buying puts is a safer way to get at the same strategy and outcome.

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