So, I've been on this site for a long time, and there's always the guy who's like you've been on this site for so long and you don't know this stuff? Nope. Because I've spent maybe 1% of my time learning about options.
Look, I've been reading more about options, and I have some questions.
First, it seems like a lot of people make money writing options. The payoff chart for a lot of these basically seems like, if price stays at or above a certain price, you make a little money, and if price goes below it, you lose potentially a lot of money. Yet this is peddled as a strategy. What am I missing? Is this a lot of small wins and few big losses? If you're so confident price will stay above a certain price, why not buy a call or stock?
Second, let's say a stock is at 100 and you think it's going to fall. You could short it, but you'd rather buy puts. Is there a reason and/or name for doing it like this:
Buy 1 95 put
Buy 1 90 put
Buy 1 85 put
etc.
edit - let me clarify: instead of buying one put at like 95, you are buying many puts at different prices, each lower than the other. So if price falls, some/all of them may give money.
So if price drops a bit, you make a little, and if it drops a lot, you make heaps?
Third, I found a video where a guy was talking about buying puts to hedge your risk. For example, he said if you bought a stock at 100 and it went up to 200, and then you were worried it might fall, so you might buy a 150 put. Ok, this makes sense. But. If you think it's going to fall, why wouldn't you just sell some of your shares rather than buy a put? You're going to lose less if it falls, and you're going to make less if it rises.
Forth, my broker is TDAmeritrade. I have seen some fancy option charts places with lines and stuff that show you how much you'll generate. My broker doesn't do this. Can you recommend someone who does?
Finally, are there websites that will do this? I found https://www.optionsprofitcalculator.com/ which sort of does what I'm asking but not really.
Appreciation!
Look, I've been reading more about options, and I have some questions.
First, it seems like a lot of people make money writing options. The payoff chart for a lot of these basically seems like, if price stays at or above a certain price, you make a little money, and if price goes below it, you lose potentially a lot of money. Yet this is peddled as a strategy. What am I missing? Is this a lot of small wins and few big losses? If you're so confident price will stay above a certain price, why not buy a call or stock?
Second, let's say a stock is at 100 and you think it's going to fall. You could short it, but you'd rather buy puts. Is there a reason and/or name for doing it like this:
Buy 1 95 put
Buy 1 90 put
Buy 1 85 put
etc.
edit - let me clarify: instead of buying one put at like 95, you are buying many puts at different prices, each lower than the other. So if price falls, some/all of them may give money.
So if price drops a bit, you make a little, and if it drops a lot, you make heaps?
Third, I found a video where a guy was talking about buying puts to hedge your risk. For example, he said if you bought a stock at 100 and it went up to 200, and then you were worried it might fall, so you might buy a 150 put. Ok, this makes sense. But. If you think it's going to fall, why wouldn't you just sell some of your shares rather than buy a put? You're going to lose less if it falls, and you're going to make less if it rises.
Forth, my broker is TDAmeritrade. I have seen some fancy option charts places with lines and stuff that show you how much you'll generate. My broker doesn't do this. Can you recommend someone who does?
Finally, are there websites that will do this? I found https://www.optionsprofitcalculator.com/ which sort of does what I'm asking but not really.
Appreciation!
