Buying Put Options: How to Pick the Right Strike Price ☝

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Buying Put Options: How to Pick the Right Strike Price

You have XYZ stock trading at $50 and you believe its going lower. The good thing about put options is that the price could go to $1000 and you still don't lose more than what you've paid for the option. (as opposed to a straight short where you are losing every time the stock goes up a dollar).

How do we decide what strike to take?

Buying put options at different strike prices:

You have XYZ stock trading at $50
A $48.50 put is priced at $1
A $50 put is priced at $2
A $51 put is priced at $3
A $30 put is priced at $0.10

An option's price is generally made of intrinsic and extrinsic value; intrinsic value being the value in the deal. For instance the $51 put option has an instrinsic value of $1. Extrinsic value is made up of the time we have until the contract expires, the strike price and the implied volatility. Do we buy the put that is already 'in-the-money' but is the most expensive or the least expensive!?

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[reactiontube]

Thank you! I've watched 10 videos of 2 hours all together on the same subject from other youtubers and no luck. You answered my question in less than 1 min.

[hlin]

I have been searching for the tip for buying put, this one is the best! Thanks

[hankyoung]

Thanks especially for your clarity, am guessing that is the result of much preparation, so very much appreciated.

[GJKemp]

Finally! Thanks for explaining this so well. Most other explanations I have come across have just confused the hell out of me.

[fighisimo]

In your experience for this very example, is it better to buy ITM *or* buy OTM to turn this OTM *in the money* later that day? what's best for gains?

[matts]

If I am only trading for speculative reasons with no intention of ever buying the underlying stock, should I just choose the closest strike price?

[useemehere]

Wow for just a short time of watching you I learned a lot buying a Put Option because per your example like in Casino roulette if you're so lucky to guess that 1 single number win you'll get a big $$$ win but little of chance of winning. So buying Put Option is like Casino play and I learned that how this Put Option work on Stock market. I will try to learn this Stuff instead of going to Casino. Thanks.

[ginpok]

how do you claim the money? Do i need to watch the stock all day or is there a automatic feature that sells so I can claim my winnings?

[BigBeastHunter]

I bought puts for Corona before watching this video, made money, but not like the one you're talking about. I should've watched this sooner lol

[zzhughesd]

Mark. I’ve learnt the strangle and also naked ( sell puts ) for stable firms. My question is with options. On IB, a video showing a execution of an option trade be amazing. So used to just basic spreads on IG or CFDs or Stock purchase trying to sell a put is hard as hell.

[fighisimo]

real clear, best explanation out there

[MrScientifictutor]

Best explanation I have seen so far. Excellent.

[jeffreylouism]

I need some advice. I did a Put /Buy on CCIV for $12.50 by 2/19 for $14. What am on the hook for if it doesn't hit? Thanks best video I've seen on options.

[CouponFrenzy]

I don't understand. I bought a put and it went down in value. As it went down my account kept going down with it. It didn't stop going down until I covered the put. Why did my balance keep going down?

[alexisimon]

Thank you so much for this explanation

[Jdgarcia]

Would i not make money at 48.50 if im betting it will be at 50.00 or below?

[stockscollege]

This video helped soo much..I love it..thanks 😊

[jenglish]

Absolute rubbish: Try this one: Option period/365, take sq root, multiply times stock price times implied volatility (available on most computer option scans) and you have one standard deviation from the price or nearly 70% probability of movement to first pip or first strike price for option. If you half that number and add it to original in either direction, you arrive at 2 standard deviations which puts range at 90% probable. Somewhere in this range is the correct strike price based on option price probable movement, bid ask and a few other decision models. But at least you now know what the probable range for setting a profitable strike price is.

[jaybee]

All these options videos are about to get a LOT of youtube ad revenue