I'm curious if many (or any) Bears out there are buying calls, not so much to hedge risk, but rather to lock in a good deal. Personally, I feel that the downward potential for this market is substantial and totally unrealized. Nevertheless, there are a couple of companies that I'd love to own a year from now at current valuations. And if they go lower from here, I'd happily buy more. Anyone else in a similar boat?
Not sure if I understood you correctly, but in that case wouldn't you look to sell puts? When stocks tank some more you can collect them at lower prices, if they don't you collect premium with IV up a notch it becomes a bit more interesting again these days.
I bought shares AND calls on Valero (today and yesterday) and Statoil (today). Two INEXPENSIVE companies with amazing cash flow. I love anything that people have to have no matter what, like gasoline! Remember the terrible economic crisis in 79, when the lines for gasoline were a mile long?
Anyone doing the trade I described above could buy puts to hedge, or if they were extraordinarily bullish. No prob. Selling puts on top of a long position is a real bullish, as makloda said. If you expect a specific stock to tank, you wouldn't want to be a put seller. I think you mispoke, makloda.
Buying calls is optimal for my present trading strategy, though selling puts may be a viable option for others. As I'm presently focusing on short plays exclusively, I'm hedging market risk by buying calls -- just in case the bulls come back in full force. If the market declines, my short positions pay off and my only risk is the premium I paid. More importantly, the premiums on calls for a number of stocks have diminished substantially in the last week. It seems that a market correction is being priced in, even on calls near or at the money. Hence, the risk involved in buying calls is especially low.
Well, with the futures as strong as they are this morning, I'm glad I grabbed a handful of April calls!