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
- 10.5k
26
votes
Accepted
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'...
- 35.9k
23
votes
Accepted
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 ...
- 76.9k
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 ...
- 1,568
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 ...
- 953
15
votes
Accepted
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 ...
- 76.9k
14
votes
Accepted
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 ...
- 76.9k
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 ...
- 76.9k
10
votes
Accepted
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. ...
- 2,912
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 ...
- 488
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 ...
- 76.9k
10
votes
I have a put option affected by a dividend that has been renamed and no longer traded but is ITM
Options created after the $8 special dividend that have strikes above current share price are in-the-money. While your option appears to be ITM, it is not because the $8 dividend is attached to ...
- 76.9k
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 ...
- 76.9k
8
votes
Accepted
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 $75 plus commission. Some brokers have mini options ...
- 1,189
8
votes
Accepted
Do most rookies make a fortune in a bear market by short selling and put options?
Your friend's advice is good advice. You should never be over confident in the financial markets regardless of your investment/trading skills and experience.
Yes, you can make a lot of money in a ...
- 76.9k
8
votes
Does, buying a put involve someone to sell a call?
No, when you buy a put it means the counter-party is selling the put.
- 5,350
8
votes
I have a put option affected by a dividend that has been renamed and no longer traded but is ITM
MBIA paid an extraordinary dividend of 8$ on Dec 26, 2023, announced on Dec 7, 2023.
When exercising the put you are supposed to pay that dividend, so the put gives you the right to pay this dividend ...
- 2,983
7
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, ...
- 37.8k
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 ...
- 76.9k
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 ...
- 6,430
5
votes
Accepted
What happens to a PUT contract for a company that is sold above the strike price and before expiration?
If the company is acquired for cash, the expiration of the options expiring after the acquisition date will be accelerated to the acquisition date. Since your proposed scenario involves $20 per ...
- 76.9k
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 ...
- 10.4k
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 ...
- 76.9k
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 ...
- 76.9k
4
votes
Selling To Close
Yes, if there is liquidity you can sell your option to someone else as a profit. This is what the majority of option trading volume is used for: speculative trading with leverage.
- 20.2k
4
votes
How can an option seller get out of a contract?
However, doesn't the sellers obligation to fullfill the put/call option still remain?
No. Buying to close effectively transfers the obligation to buy or sell the underlying stock to the party that ...
- 140k
4
votes
Accepted
Does option delta predict expiration probability?
Googling "delta probability expiration" will offer lots of references on the web that discuss delta as a proxy for the probability of expiring in-the-money.
Delta is an approximation of the ...
- 76.9k
4
votes
Accepted
Risk of selling stock cash secured puts and covered calls
Your analysis is correct other than a conclusion of it being easy money.
The first problem I see is the 7-8% premium per week. If you're evaluating an ITM option then you have to calculate return ...
- 76.9k
4
votes
Accepted
Is all of put option time value when OTM?
A call is out-of-the-money (OTM) if the strike price is higher than the market price of the underlying.
A put is out-of-the-money if the strike price is lower than the market price of the ...
- 76.9k
4
votes
Are buying puts valid portfolio protection?
OTM protective puts are like a traditional insurance policy. You have a cost and you have a deductible. In the case of puts, the deductible is the underlying's current value less the strike price. ...
- 76.9k
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