V. 19:12 (46-50): Repair Strategies With Options by Kevin Lund and Tom Gentile

Repair Strategies With Options by Kevin Lund and Tom Gentile

Here’s a strategy for fixing a good trade gone bad.

As we’ve seen many times in the last year, a gap down with bad news on a stock you’re holding can not only be devastating to your trading account, but may also test the depths of your skills as a trader. Even if you are the most gifted, insightful trader around and you are certain the stock will move in your favor, the financial markets are sure to humble you — as they did everyone the week following the tragedies of September 11. Though it may seem hopeless when major failures occur, there are ways to fix such trades with virtually no additional cost or risk to you. Using options to fix a good stock trade gone bad is not only a smart way to get yourself out of a bind, but it may also be one of the only logical means for repair.