BP Stock's Nightmare, An example How you can be its Investor with PEACE OF MIND ?

BP is on the Brink of collapse, its Stock price plunged from this year high at $64.0 to its low at $36.00 this week  after the OIL leakage in the Mexico Gulf, and the company may even go bankrupt or be a potential target for being taken over.

This is  a SAD story and it can happen to any Strong and Solid company, So how do we ensure that our INVESTMENT in STOCK  are INSURED ? I believe you do buy INSURANCE  for your life, your house, your Health, your Child Education, your Car......, So do you know that you can also Buy Insurance to protect your Stock Investment....  It sounds very unbelievable ?

Buying "Insurance for Stock investment "is actually Buying CALL Options .The cost of the Option is the same as the PREMIUM you are paying to the Insurance company.

1  CALL Option is minimum 100 shares., so you can buy the no. of Call Option to be in line with no. of Stocks purchased.

The INVESTMENT DESCRIPTION IS LISTED BELOW:-

I decided to BUY  BP shares towards  End of Jan 2010 at the price $52.50,
Then I selected the CALL OPTION  BEST offers from one of the authorized BROKERS as follows:-

Option Type :         CALL
STRIKE PRICE   ;$ 52.50 (Same as purchase price)
Expiry Date         :  11- Jan-2012
Price (Best Offer):  $3.50, ( So 1 CALL =100 Shares, ,costing $350 per CALL OPTION)
(Note: A Matrix of Different Strike Price, Expiry Dates will result in different Option Price Offers)


- So when the News started to leak out on the oil spillage, I  disposed  two-thirds of the shares at $60.50 , just managed  to collect a small profit of  $4.00 per shares ($60.50-$52.50-$3.50-$0.5), (Note Misc charges plus commission is approx.$ 0.5), AND you see my maximum risk for the rest of my shares quantity (one-third )is only the  Option charge of $3.50 per shares, even though the company plunges to $0.00 ! I still can retain all my remaining Investment capital.
If   I  have decided not to dispose off any of the BP stock till now(Meaning I still hold all the  BP Shares purchased ), I could have only lost $3.50  max per share, and my ENTIRE Capital of Investment still well safeguarded.
And I will wait till Jan 2012, may be my remaining BP stock can rise above its Strike price (at $52.50 plus3.50) = above $$56.00 up !! It remains to be answered.....

The BP Price chart is as follows:--

HAPPY TRADING !