How can you buy a put contract if you don’t own the shares? I’m afraid to pull the trigger on this purchase, anywhere you could suggest to find more info on how to do this?
Well first, your account must be approved for trading options.
In a company 401k, forget about it.
You have your selections and perhaps a self managed account where you can buy and sell individual stocks and bonds.
You need a IRA.
There, with proper options approval, you can trade options.
Puts and calls. You can sell them or buy them.
It’s confusing, but if your clouds clear, you get it.
To start, remember…..if you sell a call and don’t close it out before expiration, you must provide the shares at the strike price.
If you buy a call and don’t close it out, you are receiving the shares at the strike price.
Reverse for the put.
So I bought an Aug 4 put with strike price of 180 2.22 today.
Stock closed today at about $185.
If the stock drops 20$ before Aug 4, example, those $2.22 shares are worth about 15$.
So I sell, close out.
Bottom line, it’s a gamble just like buying a stock.
But there is a strike looming.
We will all know how it works out.
Like Faceplanted said, one can purchase an option (put or call) and sell it for a profit or loss depending on the underlying stock price movement.
Best advice, use you tube or investopedia to learn.
I’m still learning.
There are a lot of strategies with options, some are dangerous.
Pretty sure, you are referring to a covered call, which requires you to have the shares in account to give up if assignment is exercised.
