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Options can be used to create a position that behaves like a short, except without the cash being deposited and without having to pay interest on borrowed share
by betterunix2 6y ago
Options can be used to create a position that behaves like a short, except without the cash being deposited and without having to pay interest on borrowed shares. Sell a call and buy a put with the same strike, and choose the strike so that the call premium equals the put premium.
- zeusk 6y agoselling a naked call requires quite a lot of margin, and akin to short selling stock - the downside is unlimited. Your option just doesn't go to zero, it starts at a negative value (what you got for selling a call) and can go to either zero and you get to keep that tiny premium or rip your face off when things like gamestop happen. People have already forgotten Optionsellers.com it seems
- betterunix2 6y agoThe same is true of short selling. Like I said, short call/long put is equivalent to a short sale (of 100 shares). How much margin is required depends on the type of margin account an investor has and what their other positions are (for some account types).