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Suspected someone was stealing so I put a 2 20s and a $100 in my wallet along with these singles. Then my GF stayed over. : Wellthatsucks
Main Post: Suspected someone was stealing so I put a 2 20s and a $100 in my wallet along with these singles. Then my GF stayed over. : Wellthatsucks
Buying puts
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Hey, So ive been trying to learn options. But I was curious. Why wouldn't someone someone just buy in the money puts and then exercise them right away? Also lets say I buy a put where the strike price is $65. And the stocks close on a day is $62. And your break even is say 61.8 Would you just hold the put until it expires?
Top Comment: Do yourself a favor and search “InTheMoney” on youtube, he’s an options trader and explains things in simple words but very detailed so you can understand it. I can tell by what you’re saying you need to educate a lot more before buying any option contracts, spend an hour or two watching some videos and gettin the very basics of what options are and learn about the greeks
Aren’t put options technically at a disadvantage over the long term?
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I apologize if this seems like a stupid question. I’m new to options, and since the market usually returns around 10% annually, aren’t put options usually not as profitable over the long term? Or are they meant for short term during market corrections or for companies on a downward spiral?
Top Comment: You should learn about call-put parity and synthetic calls and puts. You’ll see that you can convert calls into puts and visa-versa.
ELI5: Please explain how calls and puts work in the stock market
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I've tried but I can't seem to grasp how options work. Please help me.
Top Comment: An option contract is simply an agreement between two people to either buy or sell 100 shares of a specific stock at a set price (strike price) within a given time frame. A call is the right to buy shares and a put is the right to sell shares. Let’s look at calls. Say I own 100 shares of xyz stock which is currently priced at $10 per share. You think xyz is going to go up in the next 3 months, but I don’t agree. We can make a bet on this. As the owner of the shares, I can sell you 1 call with a strike price of $12 with an expiration day 3 months from now. I’m not just going to do this for free, I want to make some money if I’m right, so I sell it to you for a $0.30 / share premium and since there are always 100 shares to a contract, you pay $30. Ok, let’s fast forward 3 months. And xyz is trading at $15 per share. Since the strike was $12, you choose to exercise the option contract and buy my 100 share for $12 per share, a total of $1,200. You then immediately sell all 100 shares for $15 / share for a total of $1,500. That’s $300 instant profit, but you did pay me $30, so your actual profit was $270. So, on a $30 investment in this option, you made 9x return. If, on the other hand, at the 3 month mark xyz only went up to $11, you wouldn’t exercise the contract to buy it at $12. The contract would be void, I’d keep my 100 shares and you would have lost your entire $30 investment. Puts are basically the inverse. It’s the right to sell 100 shares at a set price in a set timeframe. This is how you make money betting the stock price will go down. Take XYZ at $10. This time you think it’s going down in the next 3 months and I disagree. So I sell you a $9 put for a premium of $0.30 per share, the same $30. This means if you exercise the contract, I will buy 100 shares of xyz from you for $9 in 3 months. Fast forward 3 months and xyz is down to $6 a share. You exercise the option, go buy 100 share for $600 and then instantly sell me those shares for $9 / share or $900. That’s an instant profit of $300 - $30 premium you paid me, for a net profit of $270 or 9x your money. These two examples are with you as the buyer of the contract. If you are the seller, your profit will only ever be the premium you collect at the outset.
What's Your Put Strategy? : r/wallstreetbets
Main Post: What's Your Put Strategy? : r/wallstreetbets
Puts and Calls (actually) explained
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Saw a post earlier of someone explaining how puts and call options work, it was hilariously wrong. Here’s how they actually work.
Calls If a stock is trading at $50 and you think it's going to go up to $60, you might buy a $55 "call" option for say, 20 cents. If the stock rose to $60, that would allow you to buy the stock at $55 (strike price) even though it's valued at $60, netting you a $4.80 profit on each share. On the other hand, the person that sold you the "call" would be obligated to sell you the stock at $55 at a loss of $4.80. If the stock never rises above $55 by expiration date, the "call" expires worthless and the "call" buyer is out 20 cents and the "call" seller keeps the 20 cents.
Puts If a stock is trading at $50 and you think it's going to go down to $40, you might buy a $45 "put" option for say, 20 cents. If the stock dropped to $40, that would allow you to sell the stock at $45 (strike price) even though it's valued at $40, netting you a $4.80 profit on each share. On the other hand, the person that sold you the "put" would be obligated to buy the stock from you at $45 at a loss of $4.80. If the stock never drops below $45 by expiration date, the "put" expires worthless and the "put" buyer is out 20 cents and the "put" seller keeps the 20 cents.
Top Comment: The problem with your example is that you made a profit...you know that doesn’t happen here.
Put-Writing : r/options_trading
Main Post: Put-Writing : r/options_trading
Put in about $5k on puts today : r/wallstreetbets
Main Post: Put in about $5k on puts today : r/wallstreetbets