Good time to buy Puts

Discussion in 'Finance, Investing & Economy' started by Paul_NL, Feb 27, 2007.

  1. Paul_NL

    Paul_NL Red Card

    May 18, 2006
    I want to buy puts for tommorow(28 febuary) for the Dutch stock market (AEX) as I think the global markets will be going down more tommorow. I am predicting another 3 to 5%(485-470)

    So far:

    Australia -2,50% (12.00h)
    Japan -3,23% (10.00h)
    Malaisia -6,40% (9.00h)
    South Korea -3,50% (10.00h)
  2. Sachin

    Sachin New Member

    Jan 14, 2000
    La Norte
    DC United
    What's China doing?
  3. Paul_NL

    Paul_NL Red Card

    May 18, 2006
    Small loss when Shanghai opened
  4. Footer Phooter

    Jul 23, 2000
    Falls Church, VA
    I don't think we're in for another horrible day. The market hit its low in the early afternoon and got back some of its losses. I'm not saying we'll be up, but those markets dropped in reaction to China, which caused the other drops. We'll be fine here.
  5. Paul_NL

    Paul_NL Red Card

    May 18, 2006
    So far it seems I was wrong. AEX/Euronext is 1% down and I was expecting 3 to 5%. China seems to have recovered
  6. Geoduck

    Geoduck Member

    Sep 24, 1999
    Question: I've never shorted shares or traded any sort of options, but it seems to me that buying put options would be a far safer and cheaper method of betting against a company than short-selling common stock. Are there any advantages to shorting over put-buying? And what are the US tax rates for them? Thanks in advance.
  7. bostonsoccermdl

    bostonsoccermdl Moderator
    Staff Member

    Apr 3, 2002
    Denver, CO
    With buying puts, your biggest possible loss is the premium you paid for the option contract. Once purchased that is fixed.

    You either exercise the option for a profit (in this case if the underlying security declines), or it expires worthless over set period of time..

    If you short, there is no set "time" for the short to expire, but you have potentially unlimited risk if the value of the security skyrockets for some unexpected reason.. (ie unexpected news, etc.)

    So from risk perspective, put options are better, but time is a against your side, b/c the drop must happen within a set amount of time for you to profit.

    I am assumming they are treated the same as capital gains, etc.
  8. Footer Phooter

    Jul 23, 2000
    Falls Church, VA
    I believe options are treated as capital gains, although it gets more complicated if you actually exercise them.

    I don't think shorting is treated as a capital gain. I think it's treated as income. (Do your own research on these.)
  9. Paul_NL

    Paul_NL Red Card

    May 18, 2006
    Eventhough I didn't really go so far as I expected, you can still make a good buck
  10. Geoduck

    Geoduck Member

    Sep 24, 1999
    Thanks. What bothers me about short-selling is involuntarily having to buy the stock shares back to cover the short position. Seems like it wouldn't have any advantages over put-buying (especially if the expiration date is far away), but I hear so much about bear raids and short squeezes. Maybe short sellers just enjoy the intimidation factor of driving a stock down in real time?

    Taxes - I'd heard that option trading was taxed at higher rates because they were more speculative, unless you were selling covered call options, which are apparently safer.
  11. spejic

    spejic Cautionary example

    Mar 1, 1999
    San Rafael, CA
    San Jose Earthquakes
    Gains from short sales are treated as short-term capital gains no matter how long the short is kept open.

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