tw-rl

1/ Options 101 - Put Options Yesterday, I posted Part 1 of Options 101, covering call options. I can’t leave my Bears hanging (the market has done enough of that!), so it only feels right that I cover put options next. Here’s Options 101 - Put Options!

2/ First off, make sure you are familiar with the basics. Check out my first thread below to get a quick primer (or refresher!) on the topic.

Sahil Bloom @SahilBloom1/ Options 101 - Call Options Over the last few months, with the rise of Robinhood and the day trading boom, options trading has been featured prominently in the news (for better or for worse). But what is an option and how does it work? Here’s Options 101 - Call Options! twitter.com

3/ The easiest way to think of a put option is that it is an insurance policy. Imagine you own a house that is worth $1M. You live in California, so you worry about earthquakes. You decide to buy an insurance policy. So you call up your rich friend, Paul. You offer him a deal.

4/ You will pay him for an insurance policy on the house with $1M of coverage. You’ll pay $50K for the policy, which will expire in December 2025. Paul accepts. Congratulations, you’ve just purchased a put option! Strike = $1M Expiration = December 2025 Premium = $50K

5/ You’re not as worried about an earthquake now. You’re covered! One of two scenarios now plays out: 1️⃣ - No Earthquake = 🏠 Fine 2️⃣ - Earthquake = 🏠 Damaged

6/ In scenario 1, you don’t “exercise” your option. The house is fine. You’re only out the $50K premium - worth it for the peace of mind! In scenario 2, you exercise your option. The house is damaged. Paul pays you $500K for the damages. You’re happy you bought the insurance.

7/ So to summarize the 101 series... Call Option = Bullish Bet Put Option = Bearish Bet Why buy options? ▪️Speculate on price movements ▪️Hedge long or short exposure More to come on the nuances of options - pricing, selling/writing - in Options 102 and 103! Stay tuned...