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Options vs. shorting are just two different ways to risk all your capital on a bet... the "unlimited" downside of a short position has a practical limit--it's w
by sk5t 11y ago
Options vs. shorting are just two different ways to risk all your capital on a bet... the "unlimited" downside of a short position has a practical limit--it's when your broker forces your account to cover with buys (the short squeeze) and you zero out.
- jessaustin 11y agoBuying an option only risks the cost of the option.
- eru 11y agoYou describe selling a call. Not buying a put. (jessaustin is right about these.)
- sk5t 11y agoNo, I described the practical downside exposure of a short (or, the trader could put in a stop). It is no more "unlimited" than is the downside of buying a bunch of ultimately worthless options.
- eru 11y agoUnless your options trade on an exchange, and they have a clearing house behind them. (The government doesn't let the clearing house fail.)