Explore Your Options by Jay Kaeppel
HEDGING INDIVIDUAL STOCK POSITIONS
I have certain stock holdings that I would prefer not to sell—either for tax reasons or simply because I think they will do well over time. However, I am extremely nervous about the prospects for the overall stock market in the months ahead. I'e never had much success with trying to hedge an overall portfolio. So, is there a way to hedge the positions I am most concerned about on a position-by-position basis?
Of course. One approach is simply to buy a put option ...