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SpaceX Stock Plummets to Record Low Near $120 After Seven-Day Slump (townflex.com)
submitted 3 months ago by to c/technology@lemmy.world
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[–] 1 point 3 months ago (2 children)

This is a GOOD TAKE by YOU. The big danger on puts is that you can AT MOST make 100% of the investment if the company collapses completely to $0. If, for whatever reason (the market can remain irrational longer than you can remain solvent), the stock explodes upwards, you can be on the hook for WAY more than 100% if the stock increases dramatically.

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  • [–] 1 point 3 months ago* (1 child)

    Thats not how puts work. Thats shorting the stock directly.

    A put is an options contract. You can never lose more than your purchase.

    If you pay $5.00 for a Jan $50 strike, you pay $500 (1 contract is 100 shares). As the date comes closer it becomes worth less, but as it approaches $50 or goes below it also becomes worth more. You can make a lot of money on a far out of the money put that goes near or in the money.

    If it was $50 in November that put might be worth $40 (x100) so $4,000 and you paid $500.

    The put becomes worth nothing if its over $50 by strike date.

    Its a much safer way to bet against something than directly shorting.

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