Introduction to Options: Part 3: Buying & Selling Put Options

Buying & Selling Put Options

This is the right, but not obligation to sell a stock, at a certain price, by a certain date, in groups of 100 shares.

While, it is still true, that like Call Options, with Put options you want to Buy Low and Sell High
Put options are still options contracts for stocks are bought in contracts controlling one hundred shares, and any movement in the price of the stock is magnified in movement of the price of the option.
Put options still allow crazy 10x or 100x returns.
However, almost 80% of purchased Put options expire worthless, with total loss of invested capitol.
So they are like Call options in regard to being like lottery tickets then investments, and many investors avoid them for these reasons.
And like Call options, Put options tables tell you the Probability of Success of your trade.
This makes options the most transparent stock based investment you can make because the probability of success for a given strike price is quoted in the Option Chain Table.
However, just like with Call options, many investors in Put options ignore the probabilities indicator, and focus not on the chance of success, but instead focus on the potential profits.
I call this a lottery ticket mentality.
People who buy a single lottery ticket, when 200 million are sold, are ignoring the 1 in 200 million odds against them winning, and instead focus on the thought of what they will do with their winnings, if they win.

And statistically Put options have more price action, and statistically higher profits.
Many options traders learn about Put options, but many never trade Puts because although the underlying concept is the same, everything else is backwards.
Put options are not bought when your Bullish on a stock, but when you’re bearish.
When you buy Put options you want the stock price to go down, not like when you bought Call options and you wanted the stock price to go down.
The number system for Puts is negative, as in below the market, and strike prices are negative numbers below the market price, instead of positive numbers above the market price.
So every slang term is negatively based, but positive in intent. This confuses people, so mistakes can be made, which cost investors money.

Put options are very similar to Call options, in that the core strategy is buy low and sell high, which most traders understand.
However the market conditions and market sentiment that makes these profitable is the opposite of what makes Call options profitable.
Plus the terms describing Puts are the opposite or literally the negative of comparable Call options descriptors, and Call options terms.
This is confusing for beginners and sometimes experienced traders with very little Puts experience make mistakes due to this difference and lose money.
Lastly, like Call options, Put options are transparent about your probability of success. And while using the probabilities you can be a very successful trader. Some traders focus more on high returns instead of high probability of success, and the result is lots of losing trades, and depleted capitol.