Put options
Put options:
Put option writer thinks the market will go up
Put option buyer thinks the market will go down
If you are nervous about market buy a put option.
Put options enable you to lock in a selling price (good for volatile
stocks)
A put option buyer is someone who owns the stock and wants to protect long position
in stock. Offset some of the potential loss (like buying insurance for
the short term). These put option buyers are conservative investors.
Put option buyers can also be speculators. It is less risky then shorting
the stock because they limit their potential loss
Call option buyer – speculation and leverage
Call option writer - hedging
Naked calls are risky – you can loose more than you can make because
of the potential for unlimited loss.
If you buy a put you think stock price will go down.
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