Buy Put, Or Sell Call?

You think a stock, say Infosys will move down.

Options expire in 30 days

Here is the question. Buy a put paying the premium, or sell a call and receive the premium? Assume that you will buy/ sell this option and hold until expiry.

Break Even

Now let us look at the puts, and where they break even - that is the price where will recover the entire premium

Call Vs Put

For the 900 Put to outperform the 900 Call, we need more than 6% move. For lower strikes, the moves are greater. The 840 Put needs as much as an 11% move!

That is not all, the bearish move you are expecting in Infosys has to happen within the option expiry.

TL;DR

But with Puts

  1. You have to be right
  2. You have to be massively right
  3. And you have to be right before the expiry, which means timing.

So the next time, do give selling options a chance. Unless you go wrong big time, they might just be a better way to make money. If you want an easy way to compare selling versus buying options, try Options Trade Analyser by Sensibull

Or, if you would like to know which option strategy is the best strategy for you to trade from among thousands of calls, puts, call spreads, put spreads, straddle, strangles, iron condors, iron butterflies etc, use Options Strategy Generator by Sensibull — India’s first Options Trading Platform

PS: You need margin to sell options (80k to 1 Lakh for most stocks), whereas you need only the premium for buying options.

Options Trading For All

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