I've been trying to work this out for a while:
Say I own stock X right now trading at $250.
If I were to buy a put option on stock X and I pay $5 for the option to sell at $250,
If the stock ends up worth $300, I sell the stock for $300, made $50 profit, minus $5 for the option, leaving $45.
if the stock ends up worth $200 I sell it for $250, and ended up saving myself from $45 of losses because of the option I bought.
Now same scenario except I don't own the stock, I just buy options because what's life without a little risk.
If the stock goes to the $300 point my option is worthless and I lose $5.
If the stock goes to $200 I sell the option for $50 (maybe a little less) and it's $45 profit.
Would it then be correct to say that buying put options is "less risky" to someone who owns the stock for which they are buying options, in terms of absolute (as in not percent) losses and gains?