How to protect a Stock you still want to own from a downturn?
"If you really believe in the particular stocks, then don't worry about their daily price.  Overall if the company is sound, and presumably paying a dividend, then you're in it for the long haul. Notwithstanding that, it is reasonable to look for a way out.  The two you describe are quite different in their specifics. Selling sounds like the simpler of the two, but the trigger event, and if it is automatic or ""manual"" matters.  If you are happy to put in a sell order at some time in the future, then just go ahead with that. Many brokers can place a STOP order, that will trigger on a certain price threshold being hit.  Do note, however, that by default this would place a market order, and depending on the price that breaks through, in the event of a flash crash, depending on how fast the brokers systems were, you could find yourself selling quite cheaply. A STOP LIMIT order will place a limit order at a triggered price.  This would limit your overall downside loss, but you might not sell at all if the market is really running away. Options are another reasonable way to deal with the situation, sort of like insurance.  In this case you would likely buy a PUT, which would give you the right, but not the obligation to sell the stock at the price the that was specified in the option.  In this case, no matter what, you are out the price of the option itself (hence my allusion to insurance), but if the event never happens then that was the price you paid to have that peace of mind. I cannot recommend a specific course of action, but hopefully that fleshed out the options you have." Adding on to all the fine answers, you can consider selling a covered call. You will have to own a minimum of 100 shares. It will offer a bit of protection, but limit your upside. If your confident long term, but expect a broader market pull back then a covered call might give you that small protection your looking for. "Of the two, an option is a more reliable but more expensive means to get rid of a stock. As sdg said, a put option is basically an insurance policy on the stock; you pay a certain price for the contract itself, which locks in a sale price up to a particular future date. If the stock depreciates significantly, you exercise the option and get the contract price; otherwise you let the contract expire and keep the stock. Long-term, these are bad bets as each expired contract will offset earnings, but if you foresee a near-term steep drop in the stock price but aren't quite sure, a put option is good peace of mind. A sell stop order is generally cheaper, but less reliable. You set a trigger price, say a loss of 10% of the stock's current value. If that threshold is reached, the stop order becomes a sell order and the broker will sell the stock on the market, take his commission (or a fixed price depending on your broker) and you get the rest. However, there has to be a buyer willing to buy at that price at the moment the trigger fires; if a stock has lost 10% rapidly, it's probably on the way down hard, and the order might not complete until you realize a 12% loss, or a 15%, or even 20%. A sell stop limit (a combination stop order and limit order) allows you to say that you want to sell if the stock drops to $X, but not sell if it drops below $X-Y. This allows you to limit realized losses by determining a band within which it should be sold, and not to sell above or below that price. These are cheaper because you only pay for the order if it is executed successfully; if you never need it, it's free (or very cheap; some brokers will charge a token service fee to maintain a stop or stop limit). However, if the price drops very quickly or you specify too narrow a band, the stock can drop through that band too quickly to execute the sell order and you end up with a severely depreciated stock and an unexercised order. This can happen if the company whose stock you own buys another company; VERY quickly, both stocks will adjust, the buying company will often plummet inside a few seconds after news of the merger is announced, based on the steep drop in working capital and/or the infusion of a large amount of new stock in the buying company to cover the equity of the purchased company. You end up with devalued stock and a worthless option (but one company buying another is not usually reason to sell; if the purchase is a good idea, their stock will recover). Another option which may be useful to you is a swaption; this basically amounts to buying a put option on one financial instrument and a call on another, rolled into one option contract specifying a swap. This allows you to pick something you think would rise if your stock fell and exchange your stock for it at your option. For example, say the stock on which you buy this swaption is an airline stock, and you contract the option to swap for oil. If oil surges, the airline's stock will tank sharply, and you win both ways (avoiding loss and realizing a gain). You'd also win if either half of this option realized a gain over the option price; oil could surge or the airline could tank and you could win. You could even do this ""naked"" since its your option; if the airline's stock tanks, you buy it at the crashed price to exercise the option and then do so. The downside is a higher option cost; the seller will be no fool, so if your position appears to be likely, anyone who'd bet against you by selling you this option will want a pretty high return."
"A major danger of keeping ""emergency"" funds in the form of stocks is that many of the scenarios where one would need quick access to the money will also momentarily depress the stock market.  Someone whose emergency funds were in some other form could avoid selling stocks during a momentary downturn, but someone who has no other emergency funds would have no choice but to sell during the downturn (thus losing money as well as making the downturn more significant for everyone else)." "Here are some things to consider if you want to employ a covered call strategy for consistent returns. The discussion also applies to written puts, as they're functionally equivalent. Write covered calls only on fairly valued stock. If the stock is distinctly undervalued, just buy it. By writing the call, you cap the gains that it will achieve as the stock price gravitates to intrinsic value. If the stock is overvalued, sell it, or just stay away. As the owner of a covered call position, you have full exposure to the downside of the stock. The premium received is normally way too small to protect against much of a drop in price. The ideal candidate doesn't change in price much over the life of the position. Yes, this is low volatility, which brings low option premiums. As a seller you want high premiums. But this can't be judged in a vacuum. No matter how high the volatility in absolute terms, as a seller you're betting the market has overpriced volatility. If volatility is high, so premiums are fat, but the market is correct, then the very real risk of the stock dropping over the life of the position offsets the premium received. One thing to look at is current implied volatility for the at-the-money (ATM), near-month call. Compare it to the two-year historical volatility (Morningstar has this conveniently displayed). Moving away from pure volatility, consider writing calls about three months out, just slightly out of the money. The premium is all time value, and the time value decay accelerates in the final few months. (In theory, a series of one-month options would be higher time value, but there are frictional costs, and no guarantee that today's ""good deal"" will be repeatable twelve time per year.) When comparing various strikes and expirations, compare time value per day. To compare the same statistic across multiple companies, use time value per day as a percent of capital at risk. CaR is the price of the stock less the premium received. If you already own the stock, track it as if you just bought it for this strategy, so use the price on the day you wrote the call. Along with time value per day, compare the simple annualized percent return, again, on capital at risk, measuring the return if a) the stock is called away, and b) the stock remains unchanged. I usually concentrate more on the second scenario, as we get the capital gain on the stock regardless, without the option strategy. Ideally, you can also calculate the probability (based on implied volatility) of the stock achieving these price points by expiration. Measuring returns at many possible stock prices, you can develop an overall expected return. I won't go into further detail, as it seems outside the scope here. Finally, I usually target a minimum of 25% annualized if the stock remains unchanged. You can, of course, adjust this up or down depending on your risk tolerance. I consider this to be conservative." "As far as I know, the answer to this is generally ""no.""  The closest thing would be to identify the stock transfer company representing the company that you want to hold and buy through them. (I have held this way, but I don't know if it's available on all stocks.)  This eliminates the broker, but there's still a ""middle man"" in the transfer company. Note this section from the Stock transfer agent Wikipedia article: A public company usually only designates one company to transfer its stock. Stock transfer agents also run annual meetings as inspector of elections, proxy voting, and special meetings of shareholders. They are considered the official keeper of the corporate shareholder records. The decision to have a single transfer company is a practical one, ensuring that there is one entity responsible for recording this data - Hence even if you could buy stock ""directly"" from the company that you want to own, it would likely still get routed through the transfer company for recording." "For most people ""home ownership"" is a long term lifestyle strategy (i.e. the intention is to own a home for several decades, regardless of how many times one particular house might be ""swapped"" for a different one.  In an economic environment with steady monetary inflation, taking out a long-term loan backed by a tangible non-depreciating ""permanent"" asset (e.g. real estate) is in practice a form of investing not borrowing, because over time the monetary value of the asset will increase in line with inflation, but the size of the loan remains constant in money terms.  That strategy was always at risk in the short term because of temporary falls in house prices, but long-term inflation running at say 5% per year would cancel out even a 20% fall in house prices in 4 years. Downturns in the economy were often correlated with rises in the inflation rate, which fixed the short-term problem even faster. Car and student loans are an essentially different financial proposition, because you know from the start that the asset will not retain its value (unless you are ""investing in a vintage car"" rather than ""buying a means of personal transportation"", a new car will lose most of its monetary value within say 5 years) or there is no tangible asset at all (e.g. taking out a student loan, paying for a vacation trip by credit card, etc).  The ""scariness"" over home loans was the widespread realization that the rules of the game had been changed permanently, by the combination of an economic downturn plus national (or even international) financial policies designed to enforce low inflation rates - with the consequence that ""being underwater"" had been changed from a short term problem to a long-term one." Buy a share - not a penny stock; rather a well known company like Coca-Cola, Kelloggs, Exxon, etc.  Follow the company.  Understand their business model.  See the share price fall and rise.  You will learn a lot having your own money at risk. In the US, it is perfectly legal to execute what you've described. However, since you seem to be bullish on the stock, why sell? How do you KNOW the price will continue downwards? Aside from the philosophical reasoning, there can be significant downside to selling shares when you're expecting to repurchase them in the near future, i.e. you will lose your cost basis date which determines whether or not your trade is short-term (less than 1 year) or long-term. This cost basis term will begin anew once you repurchase the shares. IF you are trying to tax harvest and match against some short-term gains, tax loss harvesting prior to long-term treatment may be suitable. Otherwise, reexamine your reasoning and reconsider the sale at all, since you are bullish. Remember: if you could pick where stock prices are headed in the short term with any degree of certainty you are literally one of a kind on this planet ;-).  In addition, do remember that in a tax deferred account (e.g. IRA) the term of your trade is typically meaningless but your philosophical reasoning for selling should still be examined. "Your strategy fails to control risk. Your ""inversed crash"" is called a rally. And These kind of things often turn into bigger rallies because of short squeezes, when all the people that are shorting a stock are forced to close their stock because of margin calls - its not that shorts ""scramble"" to close their position, the broker AUTOMATICALLY closes your short positions with market orders and you are stuck with the loss. So no, your ""trick"" is not enough. There are better ways to profit from a bearish outlook." "The question mentions a trailing stop. A trailing stop is a type of stop loss order. It allows you to protect your profit on the stock, while ""keeping you in the stock"". A trailing stop is specified as a percentage of market price e.g. you might want to set a trailing stop at 5%, or 10% below the market price. A trailing stop goes up along with the market price, but if the market price drops it doesn't move down too. The idea is that it is there to ""catch"" your profit, if the market suddenly moves quickly against you. There is a nice explanation of how that works in the section titled Trailing Stops here. (The URL for the page, ""Tailing Stops"" is misleading, and a typo, I suspect.)"