Jump to content
  • 0

Options trade


Steveblaze

Question

Please forgive me for this very silly question but I’m new to options trades and just can’t get my head around one bit.

I understand the Call and Put part of the contracts but what I can’t get a grip of is why is get a buy or sell option for each as well.

for example. Say I think the SP will hit 3300 in 2 weeks time then I’d want to Buy and Put option at that price. Why do I also get the option to Sell a put at that level too?

If I’ve understood it right if I sell a put at that level am in assuming all of the risk on that trade if the market goes up? I’m the insurer rather than the insured? Is that right?

thanks for any help 

Link to comment

2 answers to this question

Recommended Posts

  • 0
On 01/10/2022 at 11:09, Steveblaze said:

Please forgive me for this very silly question but I’m new to options trades and just can’t get my head around one bit.

I understand the Call and Put part of the contracts but what I can’t get a grip of is why is get a buy or sell option for each as well.

for example. Say I think the SP will hit 3300 in 2 weeks time then I’d want to Buy and Put option at that price. Why do I also get the option to Sell a put at that level too?

If I’ve understood it right if I sell a put at that level am in assuming all of the risk on that trade if the market goes up? I’m the insurer rather than the insured? Is that right?

thanks for any help 

Hi @Steveblaze

Thank you for reaching out.

Simply put, buying a Put option is a bearish strategy. This is a strategy that you would employ if you were bearish about the prospects of the underlying markets, or if you thought the price is likely to remain the same. You are buying the right, but not the obligation to sell a certain product at a certain price at a set date. Therefore, if the price goes down you, the option holder, would execute the right to sell at a higher price but if the price goes up you will not execute the right to sell at a lower price, therefore you lose the premium.

Whereas when selling a Put option, you would employ this strategy if you thought the market price is likely to remain the same or to rise. You are selling the right, but not the obligation for the option holder to sell you a certain product at a certain price at a set date. Therefore, if the price goes up the option holder will not
execute the right to sell you a product at a lower price, consequently you keep the premium, but if the
price goes down the option holder will execute the right to sell you a product at a higher price thus
causing you a loss.

Have a look at How you can trade options

All the best, OfentseIG

 

Link to comment
  • 0
On 01/10/2022 at 11:09, Steveblaze said:

Please forgive me for this very silly question but I’m new to options trades and just can’t get my head around one bit.

Hi @Steveblaze

Call Options Explained in 7 Minutes | Options For Beginners 2022

A call option gives the owner the right to buy 100 shares of stock at the strike price at expiration if it is ITM, or below the stock price. Mike explains the basics of call options from the long (bought) and short (sold) side, how to calculate profit or loss from the option in real-time, and why it's so important to master the fundamentals before diving into other complex options strategies.

0:00 tastytrade Learn Center Intro

0:29 Call Options Intro

1:58 Call Options vs. Long Stock

3:42 Long Call Options

4:22 Short Call Options

5:58 tastytrade Approach

6:37 Call Options Review

 

I hope this helps for your understanding.

 

All the best - MongiIG

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      21,632
    • Total Posts
      91,901
    • Total Members
      41,916
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    TraderDanielDK
    Joined 25/03/23 21:50
  • Posts

    • Charting the Markets: 24 March The FTSE 100, DAX 40 and Nasdaq 100 slide on renewed banking woes while EUR/USD, EUR/GBP and GBP/USD drop as the US dollar, gold appreciate due to flight-to-quality flows. Crude oil and copper tumble on recession fears.  Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Friday 24 March 2023         This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.  
    • Market Breakdown | WTI Oil, EURUSD, GBPNZD, EURAUDHere are the updates & outlook for multiple instruments in my watchlist.1️⃣ WTI Oil daily time frame️The market is trading in a long term bearish trend .After the last sharp bearish movement, the market is steadily recovering.Ahead, I see a major horizontal supply area.Probabilities are high, that the next bearish wave will initiate from there.2️⃣ EURUSD daily time frameAfter a breakout of a solid daily resistance, the market is preparing for its retest.Watch carefully the underlined zone and look for buying opportunities from there.3️⃣ EURAUD weekly time frameThe pair is currently approaching a weekly horizontal resistance cluster.Taking into consideration, that the pair is quite overbought, probabilities will be high to see a pullback from that4️⃣ GBPNZD daily time frameThe pair is currently retesting a broken neckline of an ascending triangle . As we discussed earlier, the trend line of a triangle and its neckline compose a contracting buy zone now.Chances will be high that the next bullish wave will initiate quite soon.For Additional confirmation use: Divergence Indicators
    • #CHFJPY: Classic Bearish Setup 🇨🇭🇯🇵   🔻CHFJPY has nicely respected a confluence zone based on a horizontal 4H resistance and a 0.5 retracement of the last bearish impulse.   The price formed a double top pattern on that and broke its neckline.   Probabilities will be high that the pair will drop lower soon. Goals: 141.172 / 140.363  
×
×
  • Create New...