Because sometimes your simple options can still lose money even if you are right with the direction of the stock movement.
So you want to stay on the other side and sell them deep-out-of-the-money Weekly Put options before Earnings Announcements and collect a juicy premium.
And, you also want to buy farther-out-of-the-money Put options at the same time. So your buying power does not get tied up.
More importantly, to protect the capital in the event of catastrophic drop in the stock following Earnings Announcements. It can play nice role as insurance
I have made a mistake of not buying insurance (farther-out-of-the-money Put options). To this day, I still regret it. But you can learn from my mistakes.
Having said that,…
It is REALLY hard to lose when you structure these trades correctly, because…..
If the stock goes up, you win!
If the stock stays flat, you win!
If the stock goes down a little, you win!
The only way you lose is if the stock goes down a lot. That’s it!
As I said, this trade gives you not one… not two… but three ways to make money.
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