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weiner_forest t1_j24bpix wrote

Reply to comment by M4tooshLoL in Can someone explain to me how calls & puts work? by M4tooshLoL

Yup. The problem, particularly with the morons here, they buy as many options as they can afford, because you don't actually need to be able to afford to execute the options.

In my above example, let's say you only had $20 total to spend. If the price goes down to $3, you still need to buy the $300 worth of Baconators in order to sell them at $400. Nope! The transaction goes through immediately.

The problem is someone will put their life savings of $100k into Baconator puts.

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M4tooshLoL OP t1_j24ocrc wrote

So I should only buy puts/calls in amount I can afford, got it. Also, what is exactly the difference between puts and short position?

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weiner_forest t1_j24syjl wrote

Puts is a short position.

And yea, you should only buy puts on what you can afford. You will almost certainly lose money on puts/calls starting out, and you will probably fail to ever beat a market index fund if you do it long enough. It's a casino. Treat it like blackjack.

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M4tooshLoL OP t1_j24trbk wrote

Basically I am interested in puts/ shorting stock,as I regularly buy stock but I always have to wait for it to go down and then buy the "dip". So I wanted to also try to make money when the market is going down.

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weiner_forest t1_j24vmel wrote

Put options is your best bet then, but like I said before, you're unlikely to beat the market. It's a casino, and the house tends to win.

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M4tooshLoL OP t1_j24w1jo wrote

If its risky, whats other option for me to make money on market during recession?

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weiner_forest t1_j26gfmw wrote

buy low and hold. look at any long term sp500 chart. whens the best time to buy? in the middle of a recession.

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