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Downside Protection For Applied Materials


Applied Materials was one of our site's top names earlier this month. It's up 12% since then after its record quarter.

Although it's still among our site's Top-50 names, Applied Materials' ranking has dropped a bit.

For longs looking to add downside protection over the next several months, we present three ways of doing so, one of which has a negative cost.

Early Gains For Portfolio Armor Pick Applied Materials

Earlier this month, Applied Materials (NASDAQ:AMAT) was one of Portfolio Armor's top-ranked names, appearing in

hedged portfolio we shared on Twitter (NYSE:TWTR) on August 10th, alongside the Global X Gold Explorers ETF (NYSEARCA:GLDX), Insperity (NYSE:NSP), Outerwall (NASDAQ:OUTR), and Shenandoah Telecom (NASDAQ:SHEN):

So the

above from Investor's Business Daily, noting that AMAT had hit a 16-year high on its record third quarter caught our eye. Since August 10th, the stock is up more than 12%, as of Friday's close.

Applied Materials has dropped a bit in Portfolio Armor's ranking since then, but it's still in the site's Top 50. For AMAT longs looking to lock in some gains here and hold for more by adding downside protection, we'll look at a few ways of doing so below.

Downside Protection For Applied Materials

If you'd like a refresher on hedging terms first, please see the section titled, "Refresher On Hedging Terms," in this previous article of ours, Locking In Gold Gains).

Hedging Applied Materials With Optimal Puts

We'll use Portfolio Armor's iOS app to find optimal puts and two optimal collars to hedge AMAT, but you can find optimal puts and collars without the app by using the process we outlined in this article, if you're willing to do the work. Either...