Author Topic: Put options - how learn?  (Read 710 times)

focals

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Put options - how learn?
« on: June 26, 2021, 06:45:37 PM »
Hi there,
Are there any good resources to learn about put options?


Thanks in advance,
AH

ChpBstrd

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Re: Put options - how learn?
« Reply #1 on: June 26, 2021, 09:33:26 PM »

MustacheAndaHalf

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Re: Put options - how learn?
« Reply #2 on: June 27, 2021, 06:49:05 AM »
I would advise you to consider a "put spread", which profits off a specific range.  Let's say you think GME ($209.51) will fall in price, but not go bankrupt.

Let's say you buy a $200 strike put expiring Jan 2023.  You pay $71 for the profits under $200/sh.  That means you have a loss until GME drops below $130/share, which hasn't happened since Mar 24 (and that was just one day).
If GME drops to $150, you have a 30% loss
If GME drops to $100, you have a 42% gain
If GME drops to $50, you have a 111% gain

Another approach is to buy the above $200 strike put, but then sell a $100 strike put on the market.  The Jan 2023 put with $100 strike was sold for $15 last Friday, so the cost of this "put spread" ($200 -> $100) is $71 - $15 = $56.  You spend less to invest, but you give up any drops below $100/sh.  ​So now:
If GME drops to $150, you have a 11% loss
If GME drops to $100, you have a 79% gain
If GME drops to $50, you still have just a 79% gain

Note with a put spread, once GME hits $100/sh, you close it.  There's no profit below $100/sh, because any gains on your $200 strike put because you sold a $100 strike put to someone else, who collects money on any drops below $100.  So a put spread gives you a specific target at which to close the position, making the timing easier.

Financial.Velociraptor

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Re: Put options - how learn?
« Reply #3 on: June 28, 2021, 11:57:31 AM »
@focals

I have the "Options University" material from the Motley Fools saved as pdf and MS word files.  Got them before they went behind a paywall.  PM me with an email address if you want copies.  Very good introductory material and better than average on the advanced topics.