First time trading options - Am I doing this right?

If $26 is the price point that you're trying to protect, then yes, that strategy will protect you. If the stock penetrates that strike by at least .01 (for most brokers), you could exercise your option and assign your shares - or you could sell the option for whatever it's worth prior to expiration.

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IMO $345 is a lot to hedge a $3100 position.

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the 3.45 price is the issue.
i havent looked at the option chain...was there not a better price (different expiry, different strike)?

I don't know what the most effective strategy would be - that's why I came here to ask. I really don't know and am trying to learn, not just for this stock but for my other positions as well. I would like to incorporate options to hedge against risk.

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But maybe, based on that expectation, I should have gone with a lower strike price and paid a lower premium?

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here's the thing...you are spending 10% of your current position to protect against a drawdown. 10% is already a drawdown

your position size isnt large enough to justify the insurance premium. in risk terms, its not worth the deductible. the method however is sound

No matter what strike you go with, the issue that you'll run into is that you're dealing with a relatively high IV (implied volatility) stock (138%) that also has a high IV percentile rank (59%) - so only 41% of the time is the IV higher than it is now. The expected price range for JMIA for the Jan. '21 expiration is +/- $12.17.

Generally speaking, I don't buy options outside of creating spreads. But in cases like this, where IV and IV rank are relatively high, I look to sell option premium. But where you're long, if you want insurance, you're going to pay a hefty price for it. The further away you are from the current price, you'll pay less. But the probability that the insurance will pay off for you is negated by the lower strike (so you'd have a larger loss on the long stock). Think of it just like the deductible on your house or car. Higher deductible means a lower premium but a larger out of pocket. Options work essentially the same way.

So to use a car metaphor, you're looking to insure a Porsche 911 GT-3 - the premium is going to be relatively high no matter what. If you're determined to keep this stock and insure it, it's going to cost you (as well as raising your cost basis/break even).

Full disclosure: I don't own the stock, and because of the high IV, I'm short JMIA put options.

listen to jag

bottom line is that it is extremely likely JMIA is going to fall when the FOMO wears off and when it does it will fall pretty hard. So either hold tight long for years or take profits soon

Easier method of doing it would be to place a stop loss order for $26. Doesn't cost anything and it either triggers automatically if that price is hit or it expires automatically at the specified time.

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Easier method of doing it would be to place a stop loss order for $26. Doesn't cost anything and it either triggers automatically if that price is hit or it expires automatically at the specified time.

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Except with a stop loss order, he loses money dollar for dollar all the way down to $26.

With the zero cost collar, he will gain back some of the loss on the stock as the PUT becomes more valuable as it approaches the strike price.

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Easier method of doing it would be to place a stop loss order for $26. Doesn't cost anything and it either triggers automatically if that price is hit or it expires automatically at the specified time.

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He is literally trying to hedge against this happening

Just a suggestion: start out with the simplest strategies (puts and calls) and learn them until anything and everything involving them is second nature to you. Test your knowledge using paper trades. The most important things to learn are risk (most important) and reward... then risk vs. reward.

Two of the better resources IMO are Tastytrade and OptionAlpha. Both have lots of free resources for the beginner to the most advanced trader. But both focus more on premium selling rather than buying or being net long options. For that there are other sites and resources. But if you get down in the weeds with either or both of those sites, you’ll see why the most consistent returns come from being net short premium (in high IV environments). But you can make money by being long in certain situations, as many here can tell you.

Once you get serious and get some knowledge under your belt, you can do very well for yourself if you are disciplined. Good luck.