Sorry for asking an elementary question, but I've never traded options and I'm trying to understand them, so I hope one of you guys will help me out. Let's say I think UAUA is going to start falling again, which I do. The stock closed at $31.60 and if I short it I think I can cover it in a few days for $26, giving me a profit of about $5.50 per share. If I'm wrong and the stock skyrockets, theoretically my losses are unlimited. Also, there is a possibility that I can be forced to cover my short by the broker at any time, regardless of where they are in the market. Plus you can't short a stock under $5 and stocks are not always available to short. Or I can buy a $30 July put contract for $1.20 per share and if the stock hits $26 I'll make $2.80 per share. But if I'm wrong, the most I can lose is $1.20 per share. Essentially I'm trading off potential gain in return for limiting my loss. Did I get that right? Are there any other advantages to buying puts instead of shorting stock?