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Options revisited: Gold fever
You'll still lose a little bit if you buy a put option at the current price.  No such thing as free hedging. Let's say you have 100 shares of IAU that you bought for exactly $12.50 per share.  This is $1,250.  Now let's say you bought a put option with a strike price of $13 that expires in April 2011.  The current price for this option is $1.10 per share, or $110.  You can sell your IAU for $1,300 any time before the expiration date, but this leaves $60 in time value. The price of the options will always have a time component that is a premium on the difference between the current price and the strike price.  (Oh, forgot to add in commissions to this.)