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Just do the opposite of what you think everyone else is doing.
Enthusiast
OP - puts are a great way to hedge the downside. What is your mental block? Are you afraid that the market will bounce up when you buy puts?
For now yes, I have a long term portfolio that I leave alone- but with my daily account I normally stick to buying calls and selling weekly puts. Since I haven’t figured out how to make money when things go downhill or zig zag as they have recently I just freeze and don’t do anything. I sold 1 put recently and that’s about it, so my money is basically sitting idle at the moment.
Subject Expert
Figure out what your trading/investment style is. For some styles you might not make trades for quite a while. Regardless, you’re not going to make money every day.
But puts are solid tools, even if you only use them for hedging. In a market like this having some ‘unit puts’ as a small hedge is very helpful as they throw up some nice cash when the market rolls over. When done right the theta burn and low delta mean they can be rolled without losing too much value.
Hhmm thanks, I’m going to dip my toes by looking at it from a hedge play (which i haven’t done).
I generally only buy puts when something is near ATH or there has been a run up for a couple days/week. Look at the chart for a specific stock and to use a more recent example, Zoom was running up like crazy this past week and hit ATH of 510-520. I bought puts this morning at opening bell and closed it EOD and was able to make very sizable gains. Of course this won’t always be the case but look at the chart of a particular stock and see when something is around ceiling/resistance point. More often that not there is going to be correction in the movement.
I think hindsight is always 20-20 and you’re right if we follow this strategy from May to even August when everything just kept breaking ATH you would get burned big so there’s definitely other factors to consider. I felt in my specific example, we’ve had a major sell off (early Sept) so I figured we won’t be breaking ATH again anytime soon and that’s why I felt the strategy of buying puts as ZM was nearing ATH was appropriate. You have to look at it on a case by case basis and evaluate market sentiment as well.
I agree though if anyone just plays puts at ATH and make money then every one would do it so there’s also definitely a luck factor in my case but that was my rational for buying that specific put.
I feel this, most times I short, I end up losing bc the market generally likes to go up. Selling puts below market at a good OTM probability is one alternative.