I have been trading stocks for years but new to options, if i want to bet against Delta Air Lines?
And trade them on options, and i’m looking at the puts, which do I trade? I’m very confused.
You should not trade them at all until you are no longer confused……..one has to know what they are doing going in and when they are getting out…….
I would stay away from the airlines completely in long term trades…….
How do you like it when people use all these terms and dont explain anything? me either
well the first thing you might want to look at is the Delta of the option…haha.
All kidding aside it really winds up being up to you. Keep in mind that you need to be right on both direction and time as all options expire. Give your idea time so go out to say June or later. The deeper in the money options have the higher delta so pick something that has some intrinsic value.
I’d look at ZQIMB as it gives you the time to work with it.
You could enhance that idea by selling an out of the money put to reduce your cost basis or selling a bear call spread where you sell say the 20$ call for .90 and buy for protection the 25$ call for .25 net credit would be .65 reducing your cost for the put from 1.70 to 1.05
Its always good to have insurance so even if you do not sell the 20$ call you should buy some call to protect yourself. Its about 4:00 am so check that answer out as I am half asleep
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It depends on your time line. I bought two month puts on GM a few years ago and made out handsomely. I like buying just in the money puts in most cases. If you are right you will make the most of a 10 strike price put.
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Options strategies are generally much more complex than stocks because there’s simply many more factors that the price of an option depends on.
An option’s price depends not only on the price of the underlying, but also on the expected volatility before expiration, time left until expiration and market risk free interest rates.
So for example, when you BUY a put, you’re not only going SHORT on PRICE, but also LONG on VOLATILITY, in other words, you’ll profit if the price of the stock goes DOWN, OR its expected volatility goes UP.
Similarly you can also SELL a call to go SHORT on PRICE, but in this case, you’re also SHORT on VOLATILITY. So you expect the stock’s volatility to go DOWN.
Also, when you have a long option position, you’re also "BLEEDING THETA", in other words, you’re paying to BUY TIME. A short position, on the hand then, is SELLING TIME.
The interest rate factor generally has the least impact on the price of an option, so it is often ignored in options trading.
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You should not trade them at all until you are no longer confused……..one has to know what they are doing going in and when they are getting out…….
I would stay away from the airlines completely in long term trades…….
How do you like it when people use all these terms and dont explain anything? me either
References :