Ask Colin

Do you use puts to trade a falling market?

No, I don't. However that does not mean that it is not a strategy that others might employ.

I suggest that anyone thinking of using derivatives should read Dr Alexander Elder's comments in his book Come Into my Trading Room. I share his views that options and warrants are a mug's game.

As far as I am personally concerned, I have only ever considered using them as a hedge. However, the hedge is expensive unless there are compelling tax reasons not to sell your physical holdings. Brokerage is so cheap now that it is better to sell now and buy back later.

There are other general reasons that are set out on my videotaped seminar.