Timing of Put Options

Let us assume that for some reason you believe that the market or a particular stock is going to fall. At this point there are three options that are facing you. First, if you own the stocks then you may want to dump them. Second, if you have the capacity to sell stocks short through your broker, you could exercise that route. Finally, you may want to buy option puts.

When you buy option puts, you make a profit if the underlying stock decreases to a given extent in value. However, for you to get involved with this strategy, you need to be familiar with selling stocks short.


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