Learn Put Option Trading Rules and Tips
Buying/trading puts is less risky than selling short (selling short is when an investor borrows stock from a broker, sells it and then buys it back at a later date to repay the broker). With put options you cannot lose more than your initial investment which allows you to control risk.
Put option trading is extremely risky and very difficult and should only be attempted after several months of studying and trading stocks. Upwards of 80% of options expire worthless. Which means people lost a lot of money.
A trader would buy and sell options in order to profit from large moves in the underlying stock’s price. If a trader feels that a stock or even the NASDAQ, NYSE, AMEX etc is going to drop then they will buy put options on the individual stock or the particular market. When and if the stock or market drops the value of the put options will go up in value. Often the percentage the stock drops is only a fraction compared to the percentage increase in value of the option. 10% drop I market could be a 120% increase in put option contract.
Options can be traded just like stocks. You can buy and sell the same option all day long or you can buy options that expire this month, next month or even years into the future. Although now is the ideal time to trade put options due to the huge drops in the market one can definitely lose a ton of money in a matter of hours. Definitely spend a lot of time studying options before trying to trade them.
