A sharelord can rent out their shares and earn an income on a monthly basis; and what many investors don't know is that the sharelord's share portfolio can be insured against any downside risk.
Many investors purchase shares without any protection and their portfolio is 100% exposed. Would you not take out any insurance on your property portfolio? Of course you won't. The insurance policy on your investment property is there to be used if something goes wrong with your property. The insurance company will pay you out for the agreed value on the property.
The same thing takes place on the share market. A Sharelord purchases a parcel of shares then insures their shares by buying a put option on those shares. They select the rate which they wish to insure their shares.
Shares are rented out to speculators who pay the sharelord a rental premium up front for renting those shares out. What the sharelord can do is use a portion of the rental premium to purchase an insurance policy and reduce their risk on the investment.
The Sharelord selects the strike price they wish to insure their shares for and that insurance policy that is purchased is valid for a certain amount of time. Usually an insurance policy is purchased on a per monthly basis.
If a parcel of shares were bought for $20.50 and rented out at $21.00 gathering a premium of $1.00. The Sharelord then buys a put option at $19.00 for $0.30 cents. They will use a part of the rental premium, $1.00, to acquire the insurance policy, so in reality the up front premium for the sharelord is $0.70.
By purchasing a $19.00 put option, the shares are insured at $19.00 and if the stock drops down dramatically, the shares can be sold for $19.00. In the life of a trade. there are two things that can happen, 1. the share price stays above the $19.00 put option price or 2. the share price stays below the put option strike price.
If the share stays below the $19.00 put option strike price and the insurance policy contract finishes, then the shares will be sold for $19.00. We will be paid $19.00 per share. The only time the sharelord would let their shares get sold at the put option strike price is if they are in profit.
The insurance policy will expire worthless and vanish from the share portfolio, if the share cost stays above the put option price. If the sharelord hangs onto the shares, all they need to do is acquire an additional insurance policy to cover their shares for the following month.
Many investors purchase shares without any protection and their portfolio is 100% exposed. Would you not take out any insurance on your property portfolio? Of course you won't. The insurance policy on your investment property is there to be used if something goes wrong with your property. The insurance company will pay you out for the agreed value on the property.
The same thing takes place on the share market. A Sharelord purchases a parcel of shares then insures their shares by buying a put option on those shares. They select the rate which they wish to insure their shares.
Shares are rented out to speculators who pay the sharelord a rental premium up front for renting those shares out. What the sharelord can do is use a portion of the rental premium to purchase an insurance policy and reduce their risk on the investment.
The Sharelord selects the strike price they wish to insure their shares for and that insurance policy that is purchased is valid for a certain amount of time. Usually an insurance policy is purchased on a per monthly basis.
If a parcel of shares were bought for $20.50 and rented out at $21.00 gathering a premium of $1.00. The Sharelord then buys a put option at $19.00 for $0.30 cents. They will use a part of the rental premium, $1.00, to acquire the insurance policy, so in reality the up front premium for the sharelord is $0.70.
By purchasing a $19.00 put option, the shares are insured at $19.00 and if the stock drops down dramatically, the shares can be sold for $19.00. In the life of a trade. there are two things that can happen, 1. the share price stays above the $19.00 put option price or 2. the share price stays below the put option strike price.
If the share stays below the $19.00 put option strike price and the insurance policy contract finishes, then the shares will be sold for $19.00. We will be paid $19.00 per share. The only time the sharelord would let their shares get sold at the put option strike price is if they are in profit.
The insurance policy will expire worthless and vanish from the share portfolio, if the share cost stays above the put option price. If the sharelord hangs onto the shares, all they need to do is acquire an additional insurance policy to cover their shares for the following month.
About the Author:
Work With Danny Younes will teach you how to insure your share portfolio while still generating an income each month. Discover how to reduce your risk with Sharelord and have that sleep at night factor that you deserve.
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