I have apple shares and i want to hedge the stocks can anyone help?

I own some Apple shares and I would like to hedge them from future price fluctuations. I know @Miles has some experience in this and would love his input. I bought some Apple AAPL shares at a $91 dollars and want to lock in the profit and avoid any future loss sort of like an insurance policy, how can I achieve this?

If your portfolio of investments contains Apple (AAPL) and your strategy is to hold the stock for a long period of time then you might be worried when the stock goes for a correction. If you have a large exposure to AAPL then over the shorter period you might see your portfolio fluctuate wildly. If you have a long position on your portfolio for Apple and you want to take advantage of periods of correction then there are many ways you can do this.

There are two ways that you can short Apple and hedge your portfolio. You can either use CFD’s (Contracts For Differences) or you can use Options. If you choose to use CFD’s then you need to implement a short position with your broker depending on how many shares you have. If you have 100 shares in the stock and you are worried the price will go down then you need to short 100 CFD’s to mitigate the risk.

With CFD’s you only need to put up between 5 to 10% in margin, this means if the total cost of the transaction comes to $1000 you only need to place $50 to open the position. If the stock continues to appreciate then you can close the short position and all you lose the $50 providing you place a stop loss on the appropriate place. If the stock falls then you will be protected on the downside because you have a short position which offsets the loss.

You might also choose to protect your portfolio using a put option. With a put you have exposure on the downside and are equivalent to shorting the stock. Options are sometimes more cheaper than CFD’s and you cannot lose more than you put in. With one put option you control 100 shares so if you have 500 shares in AAPL then you need 5 put options to protect the position.

You can use technical analysis to determine when the price is likely to go down or if you are not too sure that AAPL will report well then you can mitigate the downside risk using the put options.

There are many risks associated with having a portfolio of long positions, if you can protect your portfolio by hedging strategically using inexpensive instruments such as CFDs and Options then you portfolio will continue to rise and any short term fluctuation will be offset by the hedge.

Savvy investors always consider hedging their position should anything out of the blue make the price of a stock fall. You can think of it as an insurance policy against loss and even though your profits will not be as high if you did not have the insurance or hedge you will have peace of mind and your portfolio will not make you have sleepless nights. If you have started trading as a beginner and have exposure to AAPL then you really need to consider hedging the position from time to time to help you maintain steady growth of your capital.