Buy call or buy put?
Buy call = Sell put => bullish
Buy put = Sell call => bearish
So which will I pick if I am bullish or bearish?
Personally I like the idea of getting paid a premium while waiting to buy a stock (sell put) or sell a stock (sell call) when assigned, hence the appeal of selling rather than buying options.
Buying a stock via buy call
1. If a stock has risen far too high outside the price I am prepared to pay, I may contemplate doing a leap call with longer date to expiry so as to give the stock more time to move towards my target range.
Selling a stock via buy put
1. While selling call allows selling stock at a strike price I am prepared to sell, there is no guarantee that the sale will take place as only the buyer of call has the right to exercise. If I think the market is crashing/company is facing headwinds and need assurance that the stock can be sold at the strike price, will buy a put for protection.
2. Under usual circumstance, I am inclined to sell call option to have the stock being called away (aka sell) when buyer exercises call. However, if the stock has dropped drastically, I may consider paying a premium to buy put with longer date to expiry to give stock more time to move up. Selling and rolling call to higher strike n expiry is possible, but the option losses may end up being compounded that it makes sense to pay premium to buy put instead.
1. While selling call allows selling stock at a strike price I am prepared to sell, there is no guarantee that the sale will take place as only the buyer of call has the right to exercise. If I think the market is crashing/company is facing headwinds and need assurance that the stock can be sold at the strike price, will buy a put for protection.
2. Under usual circumstance, I am inclined to sell call option to have the stock being called away (aka sell) when buyer exercises call. However, if the stock has dropped drastically, I may consider paying a premium to buy put with longer date to expiry to give stock more time to move up. Selling and rolling call to higher strike n expiry is possible, but the option losses may end up being compounded that it makes sense to pay premium to buy put instead.
Leap options are more expensive, so far I have not traded them. Worth mentioning leaps options are appropriate for long term investors looking to hedge their positions.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment