There are a number of ways to protect gains and income within your portfolio. These can include employing any one of the following;
- Bought puts - Like an insurance policy, a bought put places a floor under the current (or near to) price of your holding. This means any significant drop in that holding will be mitigated to the strike price of the put option. Typically, bought puts will be engaged on the back of strong growth and signs of impending weakness in markets.
- Hedging - Utilising margin through a product such as a CFD can be engaged to hedge a portfolio position so that any downside movement in the share position will be made up for on the hedge position.
- Converting to Cash - Perhaps the easiest way to protect gains is to liquidate them and hold cash for re-entry at lower levels. This strategy may be employed if the outlook is more bleak and other protective measures do not offer as much security or the cost to implement is not worthwhile.
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