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Why Options Trading Is a Bad Idea
- Bostonian 5y agoWhen you think a stock such GameStop is absurdly valued but don't want to take the risk of unlimited losses by shorting, buying a put can be considered, but only if you are willing to lose the amount invested in the put. Even if you are right that a stock is overvalued, it may not fall below the strike price before expiration. For speculative long positions I suggest buying stock instead of call options.
- ALeus26 5y agoAbsolutely, some hedge funds have learnt a painful lesson of a so-called short squeeze.. Put options can also be quite expensive but risk-wise way more attractive than shorting the stock.. To make options position less costly (but also inevitably give up some upside) put bear spreads could be considered: buying 1 put option and short-selling another put option with a lower strike.
- Husd561 5y agoIt all depends on your investment horizon.