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Is he underwater? Aren't the put options that he bought previously just not cheaper now? On options being underwater: "Underwater stock options have an exercis
by jschulenklopper 5y ago
Is he underwater? Aren't the put options that he bought previously just not cheaper now?
On options being underwater: "Underwater stock options have an exercise price which is greater than the market price of the underlying stock." Is that his situation?
- ludamad 5y agoTo be "short" you can sell borrowed equities, sell calls that you write, or buy put options. Buying put options will cap your risk at the option price (I think underwater just meant "lost lots of money" - more likely to go out of bounds with the first two kinds of short positions)
- jschulenklopper 5y agoSorry, but no. Those three are all 'bearish' strategies, but "going short" is selling something you don't have. Buying put options isn't short selling, although both are anticipating a decrease in the value of something. Underwater is the term for a contract or asset that is worth less than its notional value. https://www.investopedia.com/articles/trading/092613/difference-between-short-selling-and-put-options.asp https://www.investopedia.com/articles/trading/092613/differe... https://www.investopedia.com/terms/u/underwater.asp https://www.investopedia.com/terms/u/underwater.asp
- ludamad 5y agoThanks for the clarification. I used "short" in quotes as that was the article terminology.
- retube 5y agoIf the asset he has bought is now cheaper, then yes he is "underwater" (i.e he has lost money on a mark-to-market basis - if he was to close out he would crystallize a loss)