42 votes
Accepted

Deep in the money put options

It costs you $584.9 x 100 = $58,490 to buy the put option. You would instantly make $80,000 - $22500 - $58,490 = -$990
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  • 10.1k
26 votes
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Why do speculators short-sell a stock when they wish to go short, rather than purchase put options?

Short sales have a lower direct cost (i.e., the price of the put option), and so also a higher potential profit, but a much higher risk. Unhedged short sales are incredibly risky, of course, but they'...
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  • 35k
23 votes
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Who buys these significantly out-of-money options?

A person with an opinion such as yours might sell these options because they think that there's a high probability that such options will expire. Why would someone buy them? The options could be ...
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  • 73.9k
21 votes

Better terms to use to understand Puts and Calls for options trading

This is maybe kind of stupid, but it's a mnemonic device that worked OK for me to get the hang of these two varieties of option. It may only work for American English in my particular region, so if it ...
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  • 1,538
15 votes

Who buys these significantly out-of-money options?

They might be buying it as a kind of insurance for index trackers they own; they're guaranteed that they don't lose more than 28% of their investment (until June 11th) for only a small price; even if ...
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15 votes
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Who provides the shares for exercising a put option?

If I buy a put option (which would be an option to sell stocks as far as I understood), who will provide the stocks to sell if I decide to exercise it? Should I have/provide the stocks or is it the ...
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  • 73.9k
14 votes
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Do companies sell puts when buying back shares?

In the early 90's, the SEC issued a ruling that allowed companies to sell puts on their stock for the purpose of buybacks. The short puts don't necessarily assure the company that they will acquire ...
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  • 73.9k
12 votes
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Is selling put options an advisable strategy for a retiree to generate stable income?

No. In good years, the income seems free. In a down year, particularly a bad one, the investor will be subject to large losses that will prove the strategy a bad one. On the other hand, one often ...
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12 votes

Better terms to use to understand Puts and Calls for options trading

The owner of a call has the right to buy the underlying at the strike price any time before expiration. The seller of that call has the obligation to sell the underlying at the strike price if an ...
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  • 73.9k
10 votes
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Am I understanding buying options on stock correctly?

Here is a quick and dirty explanation of options. In a nutshell, you pay a certain amount to buy a contract that gives you the right, but not the obligation, to buy or sell a stock at a predetermined ...
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  • 51.6k
10 votes

Am I understanding buying options on stock correctly?

Options have legitimate uses as a way of hedging a bet, but in the hands of anyone but an expert they're gambling, not investing. They are EXTREMELY volatile compared to normal stocks, and are one of ...
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  • 31.8k
10 votes
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Always profitable combination of options strategies?

In theory, no. In practise, occasionally. In theory if the market is working correctly the price of a matched put and call in the same stock should align such that there is no profit in buying both. ...
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  • 2,892
10 votes

Better terms to use to understand Puts and Calls for options trading

Not really answering your question, but I think it's better just to remember the existing words that are used. PUT option I have a stock, I have the option to put it back on the market. Like I would ...
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10 votes

What does buying put option at a certain amount mean?

BUY BANK NIFTY 39000 PUT @ 246 It means what it says: It's a BUY order for a PUT The underlying is the BANK NIFTY The strike price is 39,000 The cost is 246 This entire statement is what a buy ...
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  • 73.9k
9 votes

Wouldn't it always make sense to be an Option Writer (seller)?

Many web sites state that "90% of options expire worthless." That is categorically FALSE. The majority of options do not expire worthless. As per stats provided by the CBOE: 1) About 10% of options ...
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  • 73.9k
8 votes
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Put Option Pricing

Standard options are contracts for 100 shares. If the option is for $0.75/share and you are buying the contract for 100 shares the price would be $75 plus commission. Some brokers have mini options ...
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  • 1,189
8 votes
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Do most rookies make a fortune in a bear market by short selling and put options?

Your friend's advice is good advice. You should never be over confident in the financial markets regardless of your investment/trading skills and experience. Yes, you can make a lot of money in a ...
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  • 73.9k
8 votes

Does, buying a put involve someone to sell a call?

No, when you buy a put it means the counter-party is selling the put.
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  • 5,280
7 votes

Is selling put options an advisable strategy for a retiree to generate stable income?

This is a really bad idea. You are asking to be forced to pay for something at a time when you most likely NOT want to buy it. Why? There is no stability (much less any degree of predictability) to ...
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  • 2,040
7 votes

Buying puts without owning underlying

Yes, it's completely normal to buy (and sell) puts and other options without holding the underlying. However, every (US) brokerage I know of only permits this within a margin account. I don't know ...
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  • 14.9k
6 votes

Why do speculators short-sell a stock when they wish to go short, rather than purchase put options?

Yes, the potential loss for a short seller of stock is almost unbounded but no stock has ever gone to infinity. Anyone with any experience with shorting would practice disciplined risk management ...
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  • 73.9k
6 votes

Can you buy an option and immediately exercise it? Options delays questions

You can, but it is easier just to throw your money away. The process you describe can never result in profit, as the option is priced according to the underlying security and the risk. Of course, ...
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  • 37.1k
5 votes
Accepted

Is a naked put really that risky

So, yes, you may be having the inevitable epiphany where you realize that options can synthetically replicate the same risk profile of owning stock outright. Allowing you to manipulate risk and ...
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  • 20.1k
5 votes

Buying puts without owning underlying

In the money puts and calls are subject to automatic execution at expiration. Each broker has its own rules and process for this. For example, I am long a put. The strike is $100. The stock trades ...
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5 votes

When a near term outlook on an asset is negative, is it possible to make money using both put and call options?

Whether or not you make money here depends on whether you are buying or selling the option when you open your position. You certainly would not make money in the scenario where you are buying options ...
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  • 6,337
5 votes

Do most rookies make a fortune in a bear market by short selling and put options?

I'm not sure what your question is. If your bet happens to be the same way the market goes, you'll make money. If you buy stocks, you're betting they'll go up. So if they go up, you'll make money. If ...
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5 votes

Why did my put option lose value when the stock price moved down?

Some small corrections:. If the strike price of your put is $334 and the SPY was $334 at the time of purchase then the option was at-the-money not in-the-money. If the premium was was $9.70 per ...
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  • 73.9k
5 votes

Deep in the money put options

A long put gives you the right to sell the stock at the strike price. The 2/05 '21 $800 put costs $584.90. You have the ability to sell the stock for $800 and based on your quoted price of $225, the ...
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  • 73.9k
4 votes
Accepted

OTM puts or ITM puts in fear of market crash

If you are planning to hedge your stocks by buying, say, a put on the SPY, it's an expensive way to go. SPY is 208 right now, and the Jan16 (five months out) put is $8.20 or 4% of the value. i.e. you'...
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4 votes

Types of investments with built-in puts or similar safety features

An index annuity is almost the same as Indexed Universal Life, except the equity-index annuity is an investment with a guaranteed minimum return, with sometimes a higher return that is a function of ...
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