How to buy stock market insurance (explained in 5 minutes)

Your biggest fear, and everyone's biggest fear is losing all their money. That's why most people are terrified of the stock market. They know that it's volatile, they can't really control it, and it moves wildly and unprecedentedly without knowledge of what direction it's going to go. But the truth is, you can buy something called stock market insurance. Now, when I first tell that to people, they think State Farm or Geico. Well, you're not actually buying this stock market insurance through your favorite broker, but you're actually buying it with the market. It's something called a put option. There are only two types of options. There's a call option and there's a put option. I'm explaining what a put option is in this video. A put option literally is stock insurance. It gives you the right to sell your stock at a specified price at a specified time. Let's do a mathematical example. Let's say you buy Uber. Have you heard of Uber? Let's say you buy Uber at 80 a share and you're quite confident Uber's going to go up because Uber is now doing freight. They're going to co mingle with Tesla and do their cyber taxis. And also Uber is in the English lexicon. So if you want to go and drink and have a good time with your friends and family, you're going to say, let's go Uber there. You're not going to say, let's go take a lift. No one lifts anywhere. Everyone Ubers. So once something has become a verb in the English lexicon, that stock will go higher. That's one of my investing rules, one of my investing thesis. That's why Netflix and Chill has done so well. That stock is up over 500%, by the way, in the last few years. So Uber is going to go higher. You buy Uber at 80, but you're still scared, you're still kind of petrified, and you're worried and you want to protect your downside. You would then instantly buy an insurance policy at $70 with one month to what's called expiration. True or false. The more time you buy on an insurance policy, the more expensive it's going to be. And the answer is obviously true. You know this to be an actual fact. The longer you buy of anything, the more it's going to cost. So ultimately for you, buying an insurance policy at 70 gives you the right in this situation to sell your uber stock at 70. So if in a month's time Uber goes from 80 to 60, yes, you'd be losing money. But instead of losing $20 a share, you'd be losing $10 a share. Now, what's amazing is if you wanted to keep your Uber stock and you felt like keeping it for the long term, you could do one of two things. You could exercise the option selling Uber at 70 even though it's at 60, but you don't want to sell your stock, remember? So instead of doing that, you can actually sell the insurance policy in a situation where Uber's at 80 and you buy a put option at 70 for one month out, that's probably going to cost about a dollar. If Uber goes from 80 to 60, your insurance policy at 70 is going to be worth at least $10. How am I coming up with that math? 70 is where your insurance begins and the stock price is at 60. 70 minus 60 equals 10. That insurance policy has to be worth at minimum $10. So if you bought it for one, you would have the ability to sell it for $10, aka a 10x of your investment, which is kind of amazing. So you could sell that and create something called cash flow. And then you could use that cash flow to either buy more shares, essentially for free, or you could pull that money out. It's in a regular brokerage account, or if it's in a retirement account, obviously that hopefully that's a tax free gain. You can take that profit and again buy more shares of Uber or buy more shares of another company. But ultimately it protects your downside. Once you sell that position, you no longer have the insurance. But guess what? Just buy it again for another month out and you can continue doing that until you feel really, really comfortable, calm and collected on the particular stock of your choice. And hopefully after you buy it, that stock can start to go higher. If you at all are more interested in me showing you the exact math, which is second grade math, the logic, the steps, and the situational awareness behind when, where, how to buy a put option Buy an insurance. Post in the comment section below so I can continue to not only help you grow, but to help you just understand the choices, the leverage, and of course the options that are available to you so you can skyrocket your portfolio and you can have the retirement of your dreams. My name is Jerry Newsom, and I've helped tens of thousands of people just like yourself become financially free to create more impact, to give more, and to live more. Thank you.