I am not sure this is easily answered.I know how to buy/sell using both market/limit orders in stocks, bonds and commodities including crypto.
I would like to learn how to use puts and calls in those markets as a form of hedging. But where to start? What educational resources would any of you suggest I start this journey with? I am in no hurry and want a solid foundation of the theory and practicality of hedging ones investments. Thank you all for your input.
John R Hull wrote the definitive university textbook on options & option pricing - but it's heavy going.
Discussions here are quite useful. You need to know your "Greeks" -- ie the derivatives in the option pricing models - what they mean. Wikipedia (say on Black Scholes) can be helpful here. Concepts like "volatility smile".
Investopedia is unreliable, but might help you with the jargon.
The general principle though is time value is working against you. You pay a lot for it, and it's always decreasing as you move towards expiry.
Whatever to beware of writing naked options (ie where you don't own the underlying index, stock or instrument, as well). Because with a naked call, your potential losses are theoretically infinite. Even a naked put is not a pleasant experience, if for example, we do an October 1987 again (violent price move in a single day). You can lose far more than you bet.
Statistics: Posted by Valuethinker — Sun Mar 09, 2025 3:43 am — Replies 2 — Views 163