Been trading for a few months now but mostly focused on call options. I keep hearing about puts but never really understood them.
I noticed some traders making money when prices go down. Is that what puts are for? How do you profit from a put option?
A put option allows you to sell at a specified price. You profit when the stock price falls below your strike price. Your gain is the difference minus the option cost.
I learned the hard way and blew $180 on my first puts trade by holding too long.
Puts are basically betting against the market - you make money when the price drops below your strike before expiration.
Last month I grabbed puts on gold at $2010 strike. Gold dropped to $1985 and I made decent profit.
Put means you bet the price will drop. Made $340 last week using puts on EURUSD.
Puts act like insurance. They become valuable when prices decline. Essentially, you gain the right to sell at a price that is above the market price.
Here’s a key point: you don’t need the actual stock to benefit. You can trade the option as prices shift.
Timing is crucial as well. Puts lose value quickly as expiration nears, so ensure you anticipate those drops promptly.
Puts are basically the opposite of calls. You’re betting the stock will tank below a certain price before expiration. The further it drops, the more money you make.
Say you buy a put with a $100 strike for $2, and the stock crashes to $95. Your put’s now worth $5. Minus the $2 you paid = $3 profit per share.
Puts also work great for hedging long positions when you want to protect your portfolio.
Worst case? You lose the premium you paid. But time it right and you can make serious money.