I mainly trade call options and often hear about put options. I don’t fully grasp how they operate.
What is a put option really about? Under what market conditions do put options tend to be more beneficial?
Put options are basically betting that price will drop below a certain level before expiration.
Last month I bought puts on oil when I saw resistance forming at $85. Made 82% profit when it crashed to $78 within two days.
My biggest mistake was buying puts during strong uptrends thinking “it has to come down eventually.” Lost three trades in a row doing that.
They work best when you see clear bearish patterns forming.
Put options generate profit when the asset’s value falls below the strike price. Benefits include:
• Hedge against long positions
• Profits from downward trends
• Limited loss to the premium paid
• More affordable than shorting stocks
Ideal during market corrections or bearish conditions.
Puts are basically insurance for your trades. When I see a stock hitting major resistance with volume dropping off, that’s when they’re worth buying. Best time? During distribution phases when big money’s quietly selling.
Timing beats everything else. I’ve made solid returns using puts during earnings when companies miss expectations. Watch for confirmation - breaking support levels or RSI showing bearish divergence.
This video breaks down the mechanics really well:
Puts lose value fast as expiration approaches, so don’t hold too long if the move doesn’t happen quickly.
Puts make money when prices fall - opposite of calls. Time your entries during market weakness, don’t chase trends down.
High volatility makes puts expensive, but the payoff’s bigger if you’re right. During the recent correction, index puts delivered solid returns.
What caught me off guard was how fast puts lost value even when the market moved my way. Time decay hits harder than you’d expect.
EURUSD puts were solid for me. Entered at 1.0850 resistance, got 67% return.