BSX Case Study

Hedged Position-Married Put Model

If you have read my original post you know that I had entered the market back in February and fortunately I hedged all my positions. I plan on updating the current situation in another post, but today I wanted to share a trade that I entered into today.

I want to demonstrate what a position would look like from start to finish using the married put hedging model. I have other hedging models as well that I will cover on another post. Today I want to give an example of the Married Put model by sharing this trade and taking you through the management and adjustments for this trade, as an educational journey.

Obviously I don’t know what is going to happen with this trade, it might make money , lose money or just break even. The important part of the trade, as you will soon see, is that the risk is limited and I always know what my worst case scenario is.

Let’s get started. I was looking over my charts today and I noticed that BSX recently broke to a new high and has been on an uptrend on the daily charts. I feel that it has the potential to run after this brief pullback. Below is the chart.

I purchased 100 shares at a price of 45.65.

I then purchased the Feb 17, 2023/ 46.00 strike price at 2.10

My total cost for this trade is 45.65 + 2.10 = 47.75

Because I have the put insurance on this, meaning I have the right to sell my shares between now and Feb 17 at a price of 46.00, My maximum risk that I can lose is the difference between the my total cost and my guarantee exit price. 47.75-46.00= 1.75 or $175.00.

Now this risk may increase or decrease depending on any adjustments made to the trade.

Hit the subscribe button below to follow along on the adjustments to this trade to see it go from start to finish.

Feel free to post any questions or comments regarding this post.

Have a great week.

Ziad

Update: On February 3rd 2023 I was able to exit this position for a profit of 1.02 per share. There were no adjustments needed for this trade. I bought the stock at 45.65 and sold it for 48.67 for a gain of 3.02 and I bought the put for 2.10 and sold it for .10 for a loss of 2.00. So the total gain was 3.02-2.00=1.02 per share. This was a 58% or risk gain on the trade. Below is the chart showing where the exit and entry were.