4 ms·

No sir. You are wrong. "Going short" a security has a very specific meaning in the equities market. Same with "going long". And buying puts is NOT the same

by Nrsolis 13y ago

No sir. You are wrong. "Going short" a security has a very specific meaning in the equities market. Same with "going long". And buying puts is NOT the same thing. You've completely forgotten about the concept of premium and time value when pricing an option. For one thing, options are sold at MANY price levels (strike prices) and expiration dates. Seriously man, with all due respect, you're so mistaken its scary. One of my colleagues designed the NYSE trading network and back-office trade clearing systems. This is how I earn my living. I'll bet you your 401(k) you can't get a floor trader to endorse that explanation you just gave. It's so wrong that I'm only commenting to give other people a chance to learn from your mistake. Guys like you are how guys like me make money.

deleted 13y ago
[deleted]
Nrsolis 13y ago
Just to drive home my point: Here's the pricing for a put option on AAPL to sell the stock at $450. Expiration 16-Jan-2015 (roughly one year from now): 40.11 Down 3.09(7.15%) Jan 27 http://finance.yahoo.com/q?s=AAPL160115P00450000 http://finance.yahoo.com/q?s=AAPL160115P00450000 That price is per share. So, for roughly $4011, you can buy the right to SELL 100 shares of AAPL between now and Jan-2015 for about one hundred dollars per share LESS than what it's closing price was yesterday. Figuring in the premium, that's about $140 loss per share built into that trade yet there are 1300 OPEN contracts for just that. By your thinking, those puts should be worthless, right? Moreover, there are already ~1300 OTHER put contracts out there at this exact same strike/expiration. What was the volume yesterday in those contracts? 15. Fifteen fucking contracts. Hey...what about at $550 strike? 12 contracts. Liquidity and premium are important. A lot of the time liquidity is the MOST important thing. It doesn't matter what price someone else got if you can't get that price because there isn't a counter-party to trade with. You can't buy what someone else isn't willing to sell and you can't sell what someone ain't buying.

by Nrsolis 13y ago

deleted 13y ago

[deleted]

Nrsolis 13y ago

Just to drive home my point: Here's the pricing for a put option on AAPL to sell the stock at $450. Expiration 16-Jan-2015 (roughly one year from now): 40.11 Down 3.09(7.15%) Jan 27 http://finance.yahoo.com/q?s=AAPL160115P00450000 http://finance.yahoo.com/q?s=AAPL160115P00450000 That price is per share. So, for roughly $4011, you can buy the right to SELL 100 shares of AAPL between now and Jan-2015 for about one hundred dollars per share LESS than what it's closing price was yesterday. Figuring in the premium, that's about $140 loss per share built into that trade yet there are 1300 OPEN contracts for just that. By your thinking, those puts should be worthless, right? Moreover, there are already ~1300 OTHER put contracts out there at this exact same strike/expiration. What was the volume yesterday in those contracts? 15. Fifteen fucking contracts. Hey...what about at $550 strike? 12 contracts. Liquidity and premium are important. A lot of the time liquidity is the MOST important thing. It doesn't matter what price someone else got if you can't get that price because there isn't a counter-party to trade with. You can't buy what someone else isn't willing to sell and you can't sell what someone ain't buying.