Options Profit Calculator

Andrew Wilkinson shares his strategy for using options as insurance against market downturns and protecting business revenue. Here's the framework:

Core Strategy Overview

• Buy put options as insurance policy against market downturns
• Goal is to protect against specific revenue/cash flow risks
• Think of it like house insurance - pay premium hoping nothing happens, but protected if it does

Implementation Process

• Use options profit calculator website to model different scenarios
• Look at previous recession patterns (15%+ drawdown over 2 quarters)
• Calculate potential payout based on different market drop scenarios
• Match option coverage to specific business risks (e.g. late payments, lost revenue)

Real Example from 2020

• Identified $5-10M in potential at-risk revenue from Fortune 500 clients
• Bought $500k in put options on S&P 500
• Options would pay out if market dropped 20%
• Options went from $500k to $7M in value during COVID crash
• Sold initial position but then lost money trying to rebuy protection

Key Lessons

• Don't view temporary gains as permanent - stick to insurance mindset
• Match option protection to specific business risks
• Focus on sleeping well at night vs trying to profit
• Consider buying puts on publicly traded companies similar to your business
• Use as protection against broader economic risks affecting your sector

Risk Considerations

• Can be viewed as "gambley" but structured properly acts as insurance
• Need to be willing to lose premium paid
• Don't get caught up in trying to time market perfectly
• Focus on protection vs speculation

The core principle is using options strategically as downside protection rather than for speculation or profit generation.