This is one possible way to hedge...

Let's take an example and say I have 1000 shares of NVDA and I want to hedge it before the earning. For simplicity, NVDA price is 130.

You can just buy put spread from 130-110, this is one way to hedge it.

Or, you can buy of 125 put for $5 each, and sell 3 contract of NVDA 130 call for $7.5 each, all options expire at the same day

In the 2nd hedge, the premium from covered call will cover roughly half of the cost of the put premium, effectively lower the cost of hedge by half. The put protects almost the entirety of my postion on the downside if NVDA earning not good. If NVDA earning is good, it essentially means to profit on 1/3 of position at 130, but still let the remaining 2/3 to ride the uptrend. 

Hope this helps

所有跟帖： 

• If stock continues going up your covered call is not doing g -繡球花開- ♀ (119 bytes) () 09/04/2024 postreply 20:45:52

• I dont think you read it completely. -三心三意- ♂ (390 bytes) () 09/04/2024 postreply 21:18:55

• My strategy is a little different -aloevera- ♀ (2225 bytes) () 09/04/2024 postreply 21:04:04

• Yes, this is just an example, and you can tweak strategy -三心三意- ♂ (644 bytes) () 09/04/2024 postreply 21:29:22

• Yes, I agree that buying put first before writing calls cost -aloevera- ♀ (842 bytes) () 09/04/2024 postreply 21:50:28