How do puts work?

SunTrader · Nov 7, 2020

OptionsOptionsOptions said:
Puts are the same as calls when shorting.

To short a put you sell-to-open first - then to close the position you buy-to-close.

Yes what I said - reverse.

OptionsOptionsOptions · Nov 7, 2020

The Elon_Bezos tweet needs more context - it makes no sense as written.
As with long calls you can't get a margin call with long puts - just beware on expiry day and close any positions that are ITM (or might end up ITM) to avoid auto-exercise.

GotherL · Nov 7, 2020

OptionsOptionsOptions said:
The Elon_Bezos tweet needs more context - it makes no sense as written.

As with long calls you can't get a margin call with long puts - just beware on expiry day and close any positions that are ITM (or might end up ITM) to avoid auto-exercise.

Yeah, that's what I thought. Maybe he's talking about leverage that would make more sense.

OptionsOptionsOptions · Nov 7, 2020

GotherL said:
Yeah, that's what I thought. Maybe he's talking about leverage. If you buy on margin and go down than yes that would make sense.

You can't buy options on margin.

Overnight · Nov 7, 2020

OptionsOptionsOptions said:
You can't buy options on margin.

Does my statement stand on it's own?

https://www.elitetrader.com/et/threads/how-do-puts-work.352340/#post-5246122

BKR88 · Nov 7, 2020

OptionsOptionsOptions said:
IMO ..... ITM options have limited value.

For investors with a small account, ITM options are valuable IMO as you can purchase most stocks with approximately 25% of the funds needed to purchase the stock. Stock purchases can be bought on margin @ 50% but ITM options are even better IMO. Smaller investment and downside protection in case of a blowup.

OptionsOptionsOptions · Nov 7, 2020

BKR88 said:
For investors with a small account, ITM options are valuable IMO as you can purchase most stocks with approximately 25% of the funds needed to purchase the stock. Stock purchases can be bought on margin @ 50% but ITM options are even better IMO. Smaller investment and downside protection in case of a blowup.

99% of option traders have no interest in trading the stock.

murray t turtle · Nov 8, 2020

GotherL said:
Are puts on the same page as calls? You just buy them at lower strikes? For example, if I wanted to buy puts of NIO at $33 I would need to pay 5.35 premium on the ask? Can I buy puts at a strike higher than the current price?

%%
They work a lot like insurance/insurance companies\ the company makes money by you paying a small premium;
except you never get a dividend...…………………………………………………………………………………...