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06 August 2021
06:11 hour

Difference between buying Put Option vs Shorting

Reddit Stocks

19/02/2021 - 23:56

Relatively new to the stock game and was wondering if someone could explain to me buying a Put Option vs Shorting a stock. My understanding is that in Buying a Put Option, you’re betting on the stock going down and buy a premium for the right to then sell the stock at a certain price. For example, a stock is at $14, and you buy a put option with a strike price of $12. If that stock then falls to $10, you can buy 100 shares (or however many are in your contract) at the $10 price, and then sell them at the put price of $12 right after. Is that correct? I kind of get this confused with shorting, in which you’re also betting on the stock going down, but there’s no premium or insurance, and there’s the option of infinite losses. Is this correct?   submitted by   /u/GWillHunting [link]   [comments]


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  33. Options Clarification/Questions - Am I understanding this correctly? (22/04/2021 - Reddit Stock Market)
    I am just getting into options trading, and I want to make sure I understand all of this information correctly. I am 20 and in college, I don't have much extra money to invest so I want to make sure I get this right! I'm going to use buying a call for a stock, X, as an example. I'm going to list the information for it first, then ask my question at the bottom: Stock X: $1.38 Option: X $0.50 Call 6/18 Limit price: $0.90 - Bid $0.85 - Ask $0.90 If I bought two contracts, it would cost $180 ($0.90/share) Say I immediately exercised the option after buying it (sold for $1.38/share) I would get $276, resulting in a $96 profit Is this really how it works? It almost seems like cheating to be able to immediately turn around and get a $96 profit? Or too good to be true? Also, where does the $0.50 price come in when I'm buying the stocks for $0.90 each? Am I actually buying them for $0.50 each but the maximum amount of money I could lose is $0.90/stock? I know that in most cases you'd want to hold and then sell the call itself, but I wanted to ask this question to make sure I understand correctly.   submitted by   /u/polarstrawberry [link]   [comments]
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  34. Can I short shares in the UK? (26/04/2021 - The Motley Fool UK)
    Short selling or ‘shorting’ is an investment technique that allows an investor to profit on a stock or commodity falling in value. Although short selling may not always be the best strategy, especially for those with a small amount of capital to invest, it has its uses. But can you legally short shares in the UK? [top_pitch] What is shorting shares? A typical investment scenario entails making a profit by selling shares for more than their original cost or losing money by selling them for less than their original cost. Shorting is a different investment strategy. It involves an investor borrowing and selling shares they do not actually own in the hope of repurchasing them at a lower price at a later date. The process is simple. An investor borrows shares from a brokerage or another investor (usually for a fee). They then sell the stocks immediately, hoping that the price will fall after the sale. The aim is to buy them back cheaply when the price falls and then return them to the rightful owner, pocketing the difference. In the UK, investors can also short shares through what is known as leveraged trading. This involves speculating or betting on market price movements rather than borrowing shares. Investors can do this by: Spread betting – where they place a bet on which direction they think the stock market will move. CFD (contract for difference) trading – where they buy a contract to exchange the difference between a stock’s closing and opening price. Is shorting shares legal in the UK? Yes. Shorting shares is entirely legal in the UK. However, shorting shares has been banned in the country at various times in history. For example, during the 2008 financial crisis, the government imposed a temporary ban on short selling to protect local markets from the volatility it causes. Several countries in Europe and around the world also banned short selling early last year, at the height of the Covid-19 crisis. The majority of these bans have since been lifted. Who can short shares in the UK? Anybody with a share dealing account can short positions in a company’s shares. When it comes to shorting shares, however, hedge funds tend to be the main players. [middle_pitch] Why is shorting shares often controversial? Shorting shares has frequently sparked controversy, despite the fact that it is legal. This is especially true when it involves targeting companies in a weak financial position that could go bust. The idea of profiting from the failure of a business in which shareholders and creditors will suffer losses simply does not sit well with many people. Indeed, it was these sentiments that sparked the GameStop frenzy in the United States. A large group of traders banded together to support and buy the video game company’s stock, essentially raising its value and hurting hedge funds that had taken large short positions in the company. How does shorting benefit the financial market? Though controversial, short selling can sometimes be beneficial to the market. It can help to identify companies that are in trouble, preventing investors from losing money by investing in them. Shorting can also help identify companies with shares that are overpriced. Firms that are shorting shares must disclose their positions in UK-listed firms to the Financial Conduct Authority (FCA). A private share notification is required when the net short position of an investment firm accounts for more than 0.1% of the issued share capital of the company and again at each 0.1% threshold thereafter. When the net position reaches 0.5%, a public notification is required. Firms must make a public notification again at each 0.1% threshold above 0.5%. Investors can view the public disclosure of the short positions of big investors in the ‘short positions daily update’ published on the FCA website. Should you short shares? Although shorting shares is legal in the UK, it’s an extremely risky strategy. The losses can be significant if you make the wrong call. It’s perhaps in the best interest of novice investors to stay away from this extremely risky strategy. Such investors would likely be better off focusing on the less risky strategy of buying stock and holding it for the long term. “This Stock Could Be Like Buying Amazon in 1997” I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner. But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared. What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations. And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! More reading 1 FTSE 100 stock that is a screaming buy for me now 3 UK shares I’d pick to hold for a decade The FTSE 250 index is beating the FTSE 100 hands down. Here’s why I would pick these reopening shares 3 reasons I can make a killing with FTSE 100 stocks in 2021 The post Can I short shares in the UK? appeared first on The Motley Fool UK.
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  35. My friend wants to buy dividend stocks, then sell covered call options on them. Is this a good idea? (30/04/2021 - Reddit Stocks)
    For example he is looking at buying Telus shares. He wants to load up at least 100 of them before the record date in order to collect dividends. He then plans on writing a covered call on his 100 shares in hopes to get some boosted gains. If his strike price is perfectly set, and people buy his option but then expires worthless, he makes gains on the share price going up, as well as dividend payments AND the premium of the call option. Seems juicy! My counter argument is that it limits his upside, and also potentially covers some losses if he sells the option and the stock drops. But besides those two factors, wouldn’t it just be better to buy and hold the same stock? That way you at least have the option to hold your shares or sell them.   submitted by   /u/Magners17 [link]   [comments]
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  36. Question about UCO Option after reverse split (01/07/2021 - Reddit Stocks)
    Ok I’ll try to be brief Bought a UCO $2 call that expires 1/21/22 It did some sort of reverse split or something. Idk. But basically the value of the option crashed to $1. I obviously wasn’t selling at that point. Oil has done well and now I’m actually up like $30 (option valued at $130). My question is how much will the stocks cost me IF i decided to exercise the option because right now the UCO1 shares are going for like $80. Thanks   submitted by   /u/Johnk812 [link]   [comments]
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  37. Fairly recent to investing, how come if this order flow is so much higher on buying the share price has barely risen? Or is it just people shorting like with GME? (13/04/2021 - Reddit Stock Market)
      submitted by   /u/HoneyMoney76 [link]   [comments]
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  38. Shorts, Hard to Burrow and Short interest (23/02/2021 - Reddit Stock Market)
    Good morning, With everything crashing down, I figure today is a great day to talk about what Hard to Burrow means HTB. When you are shorting stocks at any brokers, there will be two options possible. Either ETB or HTB. Shorting as everyone knows is burrowing shares from your broker or a third party, selling them with the promise of buying it back afterwards. Easy to Burrow, and Hard to Burrow are the only two options. ETB stocks are stock widely traded, think of GE where Millions of shares exchange hands everyday. However, stocks like AMC and GME became HTB. Even the SPY can sometimes become HTB for a few days, and this can be an indicator of things to come. If it is hard to burrow, it means that a lot of people are unwilling to let you burrow their shares, which could lead to expectation of a drop. Always ask your broker or whom you trade with whether the stocks you are shorting is ETB or HTB. Most broker simply wont let you short HTB stocks, however if you can, there is some dangers in short interest which is not static like the margin interest on any stocks you buy and hold. Short interest is entirely dependent on your broker and how much they are willing to charge. Ive personally seen bills of up to 1 000$ per day on 100 000$ worth of Shorts. And there is no recourse to avoid paying those fees!   submitted by   /u/FullscaleTrading [link]   [comments]
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  39. Stockloan Shorting question (03/06/2021 - Reddit Stocks)
    Relatively new to shorting, so running a few experiments on what I consider to be the true losers. So today I tried to short 25 shares of something that is around $8 (will likely go back to $6 in a week or 2), and got hit with the rejected notice. Is there ever a situation where shares won't be loaned because it's TOO FEW ASKED FOR, or is it always purely a matter of none to loan?   submitted by   /u/Chrisanova_NY [link]   [comments]
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  40. How to FIX a LOSING OPTION TRADE ???????? How to REPAIR OPTION TRADE ???????? How to MANAGE OPTION TRADES (13/02/2021 - Reddit Stock Market)
      submitted by   /u/mylifeoflearning1 [link]   [comments]
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  41. Question about shorting (10/03/2021 - Reddit Stocks)
    If shorting enough shares at once can tank the price like what we saw today or even less than that, what’s stopping an institution from doing that over and over a thousand times per day? Short a million shares, buy a million shares at the bottom that they just created, rinse and repeat.   submitted by   /u/Bob__Kazamakis [link]   [comments]
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  42. How come there are multiple listing for IAG? The International Consolidated Airlines Group. (26/04/2021 - Reddit Stocks)
    I’m just staring my investment journey and I could find an answer for this, maybe I’m asking the wrong question on google? They look like they’re in difference currencies so does that mean they’re just listing on different markets? Is there a difference in terms of earnings calls or dividends? Other than exchanges fees is there any difference in investing on one rather than the others, I did also notice that they don’t track positions the same.   submitted by   /u/ShadowedOak [link]   [comments]
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  43. What is options trading? (14/07/2021 - Reddit Stock Market)
    I know this is a commonly asked question but I don’t understand it. So can you please tell me what it is? Could you also help me with both of the options, put and call. Do they really have a difference? If they do please tell me what is different between them. What I do know is that contracts are 100 shares worth of a stock and put is kind of like shorting a stock i guess??? Lol probably all I said there is wrong but I hope you guys can help me. Also one more question should I do it because i have seen people gain MASSIVE amounts of money but I am in WSB subreddit so I have seen them lose there life savings on options. So please tell me if I should even consider options trading. Thanks for the help.   submitted by   /u/DDaBeast4 [link]   [comments]
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  44. Is shorting and longing the same stock a commong strategy for my unique situation? (20/07/2021 - Reddit Stocks)
    First of all, I'm convinced that this stock is over-valued by far. It's heavily shorted, that if I were to panic-close my position and buy out all the shares, I'd never be able to short it again. So now, I'm thinking of buying the shares, but not closing out my position. I'm thinking of buying the shares in case it goes up a few more dollars, until they go back down. Is this strategy common?   submitted by   /u/oblique_strategies_ [link]   [comments]
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  45. Tax Question -- Gains and Losses, Multiple Trades (27/04/2021 - Reddit Stock Market)
    Apologies in advance if this is the wrong place to ask this. Let's say I start the year with a $10,000 account. I make the following trades: Buy Option A for $10,000. Sell Option A for $20,000. Realize $10,000 profit. Buy Option B for $20,000 Get rekd. Sell Option B for $5,000. Realize $15,000 loss. And end the year with $5,000 in my account. I understand traders can deduct losses up to $3,000 each year, then carry over the rest to the next year. How does it work in this situation? Overall for the year I'm down $5,000. But I did make $10k profit selling Option A. Would I still be on the hook for taxes on that $10k profit, minus $3k losses for the loss on Option B? Thanks!   submitted by   /u/Colonel_Kerr [link]   [comments]
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  46. Question about puts (15/03/2021 - Reddit Stocks)
    Hey there thanks for your time! I have a quick question. I’m trying to learn options and I can’t find this information anywhere. For example. Let’s say GME is at $250 I want to buy a put expiring in a week saying that GME will go to $50 Let’s say GME goes to $40 a share Do I make the the difference between $250 and $40 Or do I make the difference between $50-$40 This might be a completely ridiculous question. And I understand GME won’t be at $50 in week it’s just an example. I also understand buying one contract is x100 To try to put it in simpler terms, Let’s say one contract was just one share not 100. If I buy a put of GME while it’s currently sitting at $250 and I think Ittl hit $50 in 7 days. And it goes down to $40. Do I make $210 or do I make $10 Thank you   submitted by   /u/qwicgqw [link]   [comments]
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  47. Jobs offering stock purchase programs (04/04/2021 - Reddit Stocks)
    Just got a job at FedEx ground and in orientation one of the benefits we receive is the option to sign up for company stock purchasing. I am just wondering how this could be any different than taking my paycheck and buying the stocks myself. No one at the facility where I work knows what it is or the logistics of it. Does anyone here have jobs that offer something similar? And is the option even a good benefit or are they just stretching thin? I am curious as to how other people utilize this benefit if they so have it.   submitted by   /u/Ant_Smant [link]   [comments]
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  48. $GEO is a new position for Michael Burry (20/04/2021 - Reddit Stocks)
    Michael Burry predicted the housing crash, predicted the $GME short squeeze, and now he has entered a position in a penny stock $GEO, which had some crazy option activity last week. This is worth checking because: Well, because one of the sharpest analysts invested in it Because others were buying significant stakes in $GEO call options Because the stock is undervalued trading at just over $7 with revenue over $19 per share Because the about 30% of the float (tradeable stock) is short, and it will take about 5 days of continued buying at the average daily volume to cover the short interest Because the option market makers got spooked by the option purchases and they bought the stock - this is a recipe for a gamma squeeze Disclosure: long $9 calls Good luck to all, happy trading. EDIT on 3-8-21: $GEO is above $8 for the first time since this post, my calls are down 40%, up from being down 60% at one time. Quite anaemic. Good times. Good luck to all, long or short. Give it a look, but certainly do your own DD. This is not financial advice!   submitted by   /u/Snoo-55352 [link]   [comments]
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  49. Did Robinhood Take My Money? (10/02/2021 - Reddit Stock Market)
    I tried to post this to r/Robinhood but it keeps getting deleted. Yesterday I had around $1,752 in buying power (I do not have margin trading enabled) and buy a an option call for $1,750 leaving me with $2 and some change for buying power. When I woke up this morning, some of my stocks transferred to Fidelity (purposefully) during AH but I also had a deficit of $1600+ in buying power... I did not set the cash to transfer to Fidelity (it is not there anyway) nor is it in my account. Has anyone seen this issue before? I'm reading other posts in similar situations and I'm starting to get concerned.   submitted by   /u/Ceph1234 [link]   [comments]
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