Iron ore price, page-2722

I can see another good use of this strategy.

Say you are long in a stock which runs very hard in the short term. Your gut feeling is telling you it is probably right time to sell, but it is also very hard to sell when a stock has just run hard and you are showing nice paper profit. I am sure we all know the feeling and expect that most of us will hold the stock, against our gut feeling which is to sell.

In this scenario, to me this seems like a perfect opportunity to sell the stock, and then sell put options over the stock. You still have an underlying interest in the stock, in that you collect premiums if the stock keeps going up. If share price drops to the exercise price on the put, then you are still in front (compared to holding the shares), by the margin between the price you sold the shares at and the price you bought the shares back when exercised under the put option. Plus you also receive the premium on the sale of the contract.