Managing Potential Losses
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The constant possibility of loss in any options trade cannot be ignored. The installment strategy is not a cure for loss and there are no guarantees. However, the hedging potential in this range of strategies provides one element not usually found in any investment: the potential to set up a series of trades that freezes market risk at a known level and ensures that any price movement below that level is eliminated. In addition to the steps outlined for hedging with the installment method, certain timing must be avoided to remove the unintentional exercise of a short position.