How do puts work?

Discussion in 'Options' started by GotherL, Nov 7, 2020.

  1. GotherL

    GotherL

    Are puts on the same page as calls? You just buy them at lower strikes? For example, if I wanted to buy puts of NIO at $33 I would need to pay 5.35 premium on the ask? Can I buy puts at a strike higher than the current price?
    [​IMG]
     
    murray t turtle likes this.
  2. SunTrader

    SunTrader

    Not an ops guy by any means but no.

    Calls are calls and puts are puts.

    What you are showing is (top line) the bid 5.20 to buy that call and 5.35 to sell that call.

    Puts would be on another screen - and same, bid to buy and ask to sell.

    Now, if I understand correctly you can short a call by (like with equities or futures) selling first and buying back later. Same but in reverse order with a put.

    HTH
     
  3. GotherL

    GotherL

    Ok thanks, strange but I can't find a page for puts at all. I am using Tradezero.
     
  4. guru

    guru

    You got it all correct, pretty much.
    They can be on the same screen/page, depending on the broker and screen layout. Your screenshot shows them correctly on the right side of calls.

    Both calls and puts are bets on specific price at specific date, with the premium being what you pay for that bet.
    With calls you bet on the final price being above your target/bet price, while with puts you bet on the final price being below your target/bet price.
    OTM or ITM doesn’t matter, you can bet on whatever price you choose. You just pay higher premium (relatively) for OTM bets.
    ITM means in-the-money and for puts this is above the current price. OTM is out-of-the-money and for puts this is below the current price.

    Just don’t use “on the ask” prices because they can be nonsensical. Use the mid price between bid & ask.
     
    GotherL and beginner66 like this.
  5. guru

    guru

    Oh, on your screen the $33 puts cost $0.86 , not $5.35. They’re on the right side of your screen.
     
    SunTrader likes this.
  6. SunTrader

    SunTrader

    Yup same page. I didn't look right ... like my parents always told me right, left and then right again. :)
     

    • Puts are the same as calls when shorting.
    • To short a put you sell-to-open first - then to close the position you buy-to-close.
     
    • Yes ..... but you are better off buying ATM or OTM options.
    • IMO ..... ITM options have limited value.
     
    beginner66 likes this.
  7. GotherL

    GotherL

    Also, can you get margin call on puts? I thought you only lose what you paid for in premium? [​IMG]
     
  8. Overnight

    Overnight

    No. I know very little about options, but I know this much...

    If you buy a naked option, the most you can lose is the premium you paid.
     
    #10     Nov 7, 2020
    BKR88 likes this.