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Yeah but he doesn't have to do straight puts. He ca do a synthetic short. The June 9 puts are a dollar, as are the 11 call. So you sell the 11 call & buy the 9
by dxbydt 15y ago
Yeah but he doesn't have to do straight puts. He ca do a synthetic short. The June 9 puts are a dollar, as are the 11 call. So you sell the 11 call & buy the 9 put with the proceeds. Essentially you pay absolutely nothing. On June 12, if grpn stays below $9 you make the difference. If its between $9 and $11 you are ok as well. If its above $11, you cough up the difference. (Am NOT endorsing this trade - just pointing out that it does exist.)
- usaar333 15y agoThe premium is showing there though. This trade isn't even profitable unless grpn goes below $9 (and even then earnings are only $9-grpn_price). If grpn goes above $11, you lose grpn_price - 11. In other words, this is like shorting, only with $2 less on the upside - and that's where the premium shows. It's cheaper than buying straight puts, but way riskier. (Also, a lot of brokerages won't allow you to write naked calls) Disclaimer: I own a few grpn puts.