In this lecture we discuss buying put options vs selling put options.
You will learn how stock options work, how to use leverage, probability of profit, time to expiration, strike stock adjustment to your advantage and how to trade options effectively and profitably.
I will teach you the foundation for creating option strategies for consistent income, and option trading for a living.
Options trading is made easy: This course is packed with practical, insightful and educational option material. You will learn all about stock options, option investing strategies, call options, put options, buying options versus selling options and other option strategies for income.
Learning how to trade options has never been easier. We cover successful option trading strategies, options basics, how to do options trading and how to trade options for income.
Comprehensive course on Stock Options
Soup to nuts of Trading Options
Finally understand Options
So we learned about the cost side of trading right. We buy calls if we think the stocks are going up. We think they're going down. We learned about obviously undefined risk versus POPC. So we need to learn the flip side of things which is the put side of things and puts are obvious the exact opposite. We buy a put everything the stock is going down and we sell put if we leave the stock is going up. But like I always like to do a quick recap. So as far as calls go we're talking about the option contract again. Remember it's two parties and we buy a call if we think the stock is going up and we saw a call we think the stock is going down which is illustrated right here in this nice little chart. And as always we're always looking to get the mid-price whether we buy or sell because that's the fairest price for both parties. Nobody's getting taken advantage of. So how does it look for puts. Well it's the exact opposite. Same thing still two parties but in the case of puts we buy a put if we believe the stock is going down and we sell up put if we believe the stock is going up which is illustrated right here on this nice little chart. And again always looking for the mid-price. So what we learn today. Well we're going to the same thing we do with calls but now we're going to look at them with puts. We're going look at break even price and probability of profit POPC and the formulas for the puts and risk versus pupae again and look at that undefined risk versus the GOP in the case of puts Why do we ever buy puts the exact same reason we buy cars because of this potential this undefined profit potential. But when we buy options what's working against us everything the GOP is working against us. On average it's only a 35 percent probability of making money when we sell. I mean when we buy a puts in this case we're going to lose 65 percent of the time. Break even prices working against us. We'll see. So in the case of buying puts three out of four scenarios are losers. Number we want the stock to go down. So here if the stock goes up we obviously lose soccer and change we lose even the stock is down to a small and medium amount we generally lose only when the stock is down big are we going to be a winner and time is working against us when we buy an option because we're running out of time. The move has to happen in a certain time window or we lose as well. So if these are the by side pros and cons obviously you've already learned that the sell side to be the exact opposite. And it is everything that worked against us when buying works for us when we sell so publicly profit is the exact opposite it was for buying. We have a 65 percent win percentage. So 65 percent the time we're going to win as opposed to 35 breakeven price not works for us. We'll see. And in three out of four scenarios we're a winner. Stock goes up stays unchanged goes down the small and medium amount we're going to win. Only when the stocks down big are we really going to be a loser. And time works for us as well. So what's the con. Well it's a pretty big con which is this undefined loss if things go against us horribly we can take a huge loss on something like this.