Hi, and thanks in advance for all insight. I just started trading stocks a couple years ago, and I'm doing ok with that, up around 25% or so, could be better had some of my timing and tesla been better . That said, I want to get into options, to at the least, hedge some of my bets, and ideally start making some real money. I'm here to ask how/what would have been the best way to capitalize on the following real life scenario. My tesla stock was at $202 over this past weekend, and I saw it was down to like $198 premarket monday. My thought was, its going to continue down to under $190, so I was looking at options. After watching some videos on options I came to conclusion to buy puts if I want to "short" the stock. I saw the 4day put option contract for $190 at a cost of .60 per share so $60 total. Using an online option calculator, it shows i would be up over $800 at the current price of $180. Is that accurate, so if i bought 10x contracts for $600, im up 8k in 3 days? Is that how this works? One thing that confused me is there were 0 bid and 0 ask for this put option? Why so little interest if it was easy money? Or was I just ahead of the game, and blew my chance. Or was I doing it wrong, should I have paid the higher premium for $197.50 contract which I think was around $3-4. Or don't buy puts at all, and do something else entirely, to truly maximize gains on the short?
There was no bid or ask because options do not trade premarket or after hours. The price you were looking at was probably the last sale recorded when the market closed. You cannot trade options outside of regular market hours. To answer your general question, yes, if you think the stock is going to go down, you can buy a put instead of shorting the stock. For a newbie, this can have significant advantages, e.g., buying a put does not require the large amount of capital/equity that is needed to sell stock short, and does not have the risk associated with selling stock short.
Enter your trade at below link and save it and post the link here, then we can analyse it: https://optioncreator.com/long-put You can also try other strategies there. And here you can lookup the TSLA options: https://finance.yahoo.com/quote/TSLA/options But at that site (YahooFinance) they are maybe delayed by at least 15 minutes or so; better is if you lookup realtime data at your broker.
Buy 190P for .60 ($60) Breakeven = 189.40 (Strike price minus cost) Profit = 189.40 - 180 = 9.40 ($940) ***Multiply by 10 for 10 contracts. ***This would be profit at expiration. Profit prior to expiration could be a bit more depending upon time until expiration. ***Commission not included but minimal (65 cents per trade per contract). Likely premarket so not open for trading. TSLA options at that strike should have bid/ask but some options that far OTM won't have bid/ask. Buying closer to the current price increases the chance of having a profit but you lose more if you're wrong. Pay 3.50 for 197.5 means breakeven is 194 so more likely to have a profit than the 190P but lose $350 rather than $60 if wrong and hold both to expiration.
Thanks for replys. Sounds like you're confirming what I thought, but what I don't get is why I would get such a big payout (now over $1200) for so little invested ($60)? Where is that money coming from? Someone has to be losing that for me to be gaining, right? It seems too easy, I've been watching Tesla as example, go up and down for two years. So all I have to do is ride the wave up and down with calls and puts, at minimal risk out of pocket, and become rich? So the obvious play is to buy the call when its ready to go back up? Sorry I know these are dumb newbie questions, but I want to truly grasp what I'm doing before diving head first.
%% Plenty of time$ Road 2 million; no body wants them , to put it simple, so its worth $0.00, like your data showed. TSLA is below 200dma \ below 50dma \ down YTD\ down so many time frames . I see better [ inverse ETFs ]+ longs than TSLA. Don't buy puts @ all. Good points about bad timing on TSLA LOL trading is seldom'' easy money'' ; it can be , but so many option but so many option buyers lose money\ hard to beat SPY benchmark some times /so if or when you can't beat 'em join them. Timing is way to critical difficult in options; SPY, sso UPRO sometimes, SH sometimes ,QID sometimes ,TQQQ, QLD sometimes is much better. Sorry so many longs + TSLA lost money in MAR; SH,shorts QID.......... doing better. Wisdom is profitable to direct, good question
I agree. Fundamentals do not look encouraging. IMHO, perhaps look at an exit strategy instead of still dancing options around your holding.
%% I like insurance for some things; but since we are supposed to be doing risk study also. Like Dave Ramsey says, self insure some stuff. One part of a selling plan =may want to sell the underperformer[ IBD book help]; can always GET IN AGaIN IF we want.
Study this text for beginners in options trading: https://www.investopedia.com/articl...guide-option-trading-strategies-beginners.asp