-
Step 1
First off, your account you are using to trade stocks with must capable of buying stock options. Most websites that allow you to trade stocks will also allow you to buy stock options, but you will usually need to apply for this. If you are wanting to protect an investment it is important to apply for options trading as soon as possible. It can sometimes take over a week to get approved from stock trading websites.
-
Step 2
Once you have been approved and are now able to trade stock options, you need to see what option you want to buy. If you are afraid that the stock you have bought may plummet rather quickly than look into getting a "put". Buying a put is like buying insurance for your stock. If a stock falls below a certain strike price, you can still sell it at that price even if it is not worth the current amount. For example, if a stock falls to 40 dollars and you have a strike price of 50. You can still sell your stock back at 50 dollars. But be aware, stock options to expire.
-
Step 3
When buying stock options be sure to buy enough. Stock options are purchased in 100 share packs call contracts. For every contract you have, 100 shares of your stock is covered at that strike price. These stock options can either be sold for money or can be exercised to help save money that you could potentially lose in the stock market. Since they do expire, make sure you have bought the stock option that will last as long as you need it. The further away an expiration date on a stock option is, the more expensive it can be.
