Comments on: Short Selling Strategies: How To Avoid The Short Squeeze With Put Options http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html Investment Advice and Investment Research with a Contrarian Point of View Fri, 20 Nov 2009 20:21:33 -0600 http://wordpress.org/?v=2.8.3 hourly 1 By: Celeste Flynn http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html/comment-page-1#comment-15443 Celeste Flynn Wed, 15 Jul 2009 11:59:34 +0000 http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html#comment-15443 I note Mr. Rahemtulla hasn't answered you, so I'm jumping in. I have no opinion about shorting the Future (I assume you are referring to a single stock future?). But if you own stock you want to protect against an expected downfall, there is actually little difference between b. and c., except whether the trade will be a debit or a credit. If you only do b., you will receive a credit, and effectively reduce your cost basis in the stock. But you limit your potential upside if the stock increases. If you do c., you are expending a debit, essentially buying insurance against a downturn. Another possibility is to do both b. and c., which is also called a collar. This can often be done for little cost beyond commissions, as the credit for b. might be very similar to the debit for c. In this case, you both insure against downside loss and limit the upside, but if you are more concerned about the downside risk, it can be a good strategy. I note Mr. Rahemtulla hasn’t answered you, so I’m jumping in. I have no opinion about shorting the Future (I assume you are referring to a single stock future?). But if you own stock you want to protect against an expected downfall, there is actually little difference between b. and c., except whether the trade will be a debit or a credit. If you only do b., you will receive a credit, and effectively reduce your cost basis in the stock. But you limit your potential upside if the stock increases. If you do c., you are expending a debit, essentially buying insurance against a downturn. Another possibility is to do both b. and c., which is also called a collar. This can often be done for little cost beyond commissions, as the credit for b. might be very similar to the debit for c. In this case, you both insure against downside loss and limit the upside, but if you are more concerned about the downside risk, it can be a good strategy.

]]> By: Celeste Flynn http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html/comment-page-1#comment-15442 Celeste Flynn Wed, 15 Jul 2009 11:41:09 +0000 http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html#comment-15442 I beg to differ. When you buy a put, it does *not* give you the right to "get the stock at a lower price." Instead, it gives you the right to *sell* the stock at a specific price on or before expiration. As long as the stock price has dropped below your strike by more than your cost of the put, you are profitable even if you hold until expiration. So, if you buy puts, you had better not be interested in owning the stock, but rather in selling it. I beg to differ. When you buy a put, it does *not* give you the right to “get the stock at a lower price.” Instead, it gives you the right to *sell* the stock at a specific price on or before expiration. As long as the stock price has dropped below your strike by more than your cost of the put, you are profitable even if you hold until expiration. So, if you buy puts, you had better not be interested in owning the stock, but rather in selling it.

]]> By: Celeste Flynn http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html/comment-page-1#comment-15439 Celeste Flynn Wed, 15 Jul 2009 11:26:47 +0000 http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html#comment-15439 It's not well explained in the article, but here's the answer. Each option contract represents 100 shares, so if an option is quoted at $1.00, you actually spend $100 to buy the individual contract. Therefore, if you buy 10 put contracts at $1.00 per share, you're actually buying the right to sell 1,000 shares of the underlying stock at the strike price on or before the options' expiration. It’s not well explained in the article, but here’s the answer. Each option contract represents 100 shares, so if an option is quoted at $1.00, you actually spend $100 to buy the individual contract. Therefore, if you buy 10 put contracts at $1.00 per share, you’re actually buying the right to sell 1,000 shares of the underlying stock at the strike price on or before the options’ expiration.

]]> By: Selling Naked Put Options: How to Get Paid to Buy Stocks | Jutia Group http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html/comment-page-1#comment-14133 Selling Naked Put Options: How to Get Paid to Buy Stocks | Jutia Group Mon, 29 Jun 2009 13:30:04 +0000 http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html#comment-14133 [...] a put option contract. My colleague, Karim Rahemtulla, discussed put options at length in “Short Selling Strategies” last week, but there are some terms to be aware [...] [...] a put option contract. My colleague, Karim Rahemtulla, discussed put options at length in “Short Selling Strategies” last week, but there are some terms to be aware [...]

]]> By: Stock market investing | Selling Naked Put Options: How to Get Paid to Buy Stocks - Contrarian Stock Market Investing News - Featuring Bargain Stocks http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html/comment-page-1#comment-13827 Stock market investing | Selling Naked Put Options: How to Get Paid to Buy Stocks - Contrarian Stock Market Investing News - Featuring Bargain Stocks Fri, 26 Jun 2009 15:43:45 +0000 http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html#comment-13827 [...] a put option contract. My colleague, Karim Rahemtulla, discussed put options at length in “Short Selling Strategies” last week, but there are some terms to be aware [...] [...] a put option contract. My colleague, Karim Rahemtulla, discussed put options at length in “Short Selling Strategies” last week, but there are some terms to be aware [...]

]]> By: Selling Naked Put Options http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html/comment-page-1#comment-13767 Selling Naked Put Options Thu, 25 Jun 2009 22:53:58 +0000 http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html#comment-13767 [...] a put option contract. My colleague, Karim Rahemtulla, discussed put options at length in “Short Selling Strategies” last week, but there are some terms to be aware [...] [...] a put option contract. My colleague, Karim Rahemtulla, discussed put options at length in “Short Selling Strategies” last week, but there are some terms to be aware [...]

]]> By: Hayden Hamby Jr http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html/comment-page-1#comment-13386 Hayden Hamby Jr Sun, 21 Jun 2009 18:33:24 +0000 http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html#comment-13386 Great Story! As A Beginning Adventure Capitalist, I Have Worked Long And Hard For My Money. I do NOT Want To Lose My Hard Gotten Gains By Not Knowing What I am Doing In The Market Trading Business. I Once Had An Old Man Tell Me When I Was Young , He Worked HARD All His Life But Never Made Any Money Until He Started Investing In The Market, AFTER HE RETIRED! I Am Now 50 Years Old And This Old Man Told Me This When I was About 19 Years Old. I Have Never Forgot What He Told Me. I KNOW There Are Easier Ways To Make Money And NOT Cheat People Doing It! I Also Know That The World May Not Have Another Chance Such As NOW To Get RICH Investing The RIGHT Way! Thanks For The Insight. Great Story! As A Beginning Adventure Capitalist, I Have Worked Long And Hard For My Money. I do NOT Want To Lose My Hard Gotten Gains By Not Knowing What I am Doing In The Market Trading Business. I Once Had An Old Man Tell Me When I Was Young , He Worked HARD All His Life But Never Made Any Money Until He Started Investing In The Market, AFTER HE RETIRED! I Am Now 50 Years Old And This Old Man Told Me This When I was About 19 Years Old. I Have Never Forgot What He Told Me. I KNOW There Are Easier Ways To Make Money And NOT Cheat People Doing It! I Also Know That The World May Not Have Another Chance Such As NOW To Get RICH Investing The RIGHT Way! Thanks For The Insight.

]]> By: Sumer Jain http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html/comment-page-1#comment-13249 Sumer Jain Sat, 20 Jun 2009 05:24:07 +0000 http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html#comment-13249 A good educative article on Short Selling. Sir, Your opinion on after the2-3 month recent run up of , if one has lot size stock of a scrip,and wants to protect the capital against the expected downfall , what is preferable: a. To short the Future or b. To short the call of little higher strike price, c. To buy the Put of a little lower strike price ? Please advise and thanks A good educative article on Short Selling.

Sir, Your opinion on after the2-3 month recent run up of , if one has lot size stock of a scrip,and wants to protect the capital against the expected downfall , what is preferable:
a. To short the Future or

b. To short the call of little higher strike price,

c. To buy the Put of a little lower strike price ?

Please advise and thanks

]]> By: Sandie Bock http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html/comment-page-1#comment-13193 Sandie Bock Fri, 19 Jun 2009 16:54:13 +0000 http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html#comment-13193 On shortselling vs buying puts You did not mention that once you buy the put, to get your money back and then some you want to the stock to go down and you need to by sell the put to make the money you mention. IF you buy the put it just gives the right to get the stock at a lower price but most who do options are not interested in owning the actual stock. I like selling a put I make the money right away and I could buy puts on something that if it goes wrong and the stock is put to me I wanted the stock and got it cheap. On shortselling vs buying puts
You did not mention that once you buy the put, to get your money back and then some you want to the stock to go down and you need to by sell the put to make the money you mention. IF you buy the put it just gives the right to get the stock at a lower price but most who do options are not interested in owning the actual stock.
I like selling a put I make the money right away and I could buy puts on something that if it goes wrong and the stock is put to me I wanted the stock and got it cheap.

]]> By: Dermot Mccarthy http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html/comment-page-1#comment-13162 Dermot Mccarthy Fri, 19 Jun 2009 10:37:14 +0000 http://www.investmentu.com/IUEL/2009/June/short-selling-strategies.html#comment-13162 In your example of Boeing,how do you get fro a cost of $10 for the cost of 10 contracts at a "$1 per contract" to a "total cost of $1,000 " ?? In your example of Boeing,how do you get fro a cost of $10 for the cost of 10 contracts at a “$1 per contract” to a “total cost of $1,000 ” ??

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