Option and spread

[privador81]

Hello im good at stock trading,but im new in option world.
I want to use options as short stock alternative about 1-2 month

Should i take in the money or out of the money options?
For example DDR offers puts
market price 32.69
bid/ask
strike 30 0.1 0.4
strike 35 2.35 2.85
strike 40 6.9 7.6


Should i take strike 40 because spread is the smallest?

Or that spread killing me?And not to take pos at all?Or only limit order and hope someone fills it?

Thank you any answers

 

[rosy2]

Quote from privador81:


I want to use options as short stock alternative about 1-2 month

you would need to buy a put and sell the same strike call.

 

[Dinolovin]

Quote from privador81:

Hello im good at stock trading,but im new in option world.
I want to use options as short stock alternative about 1-2 month

Should i take in the money or out of the money options?
For example DDR offers puts
market price 32.69
bid/ask
strike 30 0.1 0.4
strike 35 2.35 2.85
strike 40 6.9 7.6


Should i take strike 40 because spread is the smallest?

Or that spread killing me?And not to take pos at all?Or only limit order and hope someone fills it?

Thank you any answers

The smaller spread is the 35 put.

If you think the stock will go below 30-cost of option before expiration I would purchase the 30 puts, better risk reward....if not I would purchase the 35 puts.

Although, if you purchase the 30's you will miss out on all the profit from 32.69 to 30...it really all depends on you target price.

Does that make sense?

 

[nazzdack]

You should compare the bid-ask spread to the option premium to get a better idea of which has the smaller spread on a geometric basis, not an arithmetic basis.