The other side of the options coin!

Why puts matter... ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏  ͏ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ ­  

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Hey there, it’s Micah here… Yesterday we talked about call options and how they give you 30x the capital efficiency. Today, let’s look at the other side of the coin: put options. If calls are about making money when stocks go up, puts are about protecting yourself or profiting when stocks go down. What is a put option? A put option gives you the right to sell a stock at a set price by a set date. When you buy a put you get negative delta which allows the put to profit as a stock drops. This one simple contract unlocks three powerful uses: 1. Hedging: protecting your wealth Think of hedging as buying insurance. If you own stock and want to protect against a drop, you can buy a put. Buying a put allows you to sell your stock at the strike price now matter how far down the stock goes. Each put covers 100 shares. Case study: Mark Cuban and Yahoo When Mark Cuban sold Broadcast.com to Yahoo in 1999, he was paid with 14.6 million shares of Yahoo, worth about $1.4 billion at around $95 a share. Cuban knew the internet boom might not last forever. Instead of leaving his fortune exposed, he bought puts on Yahoo stock to lock in protection. These puts acted like insurance: no matter how far Yahoo dropped, his puts guaranteed he could still sell at a higher price. When the dot-com bubble burst and Yahoo plunged toward $13, most investors saw their wealth wiped out. Cuban’s hedge saved him, preserving his fortune. 2. Income: selling puts for premium Another use of puts is collecting income by selling them. This is one of Warren Buffett’s favorite strategies. When you sell a put, you’re agreeing to buy a stock at a set price if it falls below that level. If it doesn’t, you keep the premium. Case study: Buffett and Coca-Cola In 1993, Buffett sold puts on Coca-Cola with a strike of $35 while the stock traded near $40. Why? Because $35 was the price he wanted to buy more shares. He collected about $7.5 million in premiums. If Coke stayed above $35, the puts expired worthless and he kept the cash. If Coke dropped below, he would own the stock at a discount. Either way, it was a win. Buffett turned a stock he already loved into extra income, while setting himself up to buy it cheaper. 3. Speculation: profiting when stocks fall Finally, puts can be used to bet on a decline. And unlike shorting stock, buying puts has a limited downside risk. If you believe a stock is headed lower, buying a put gives you a low-cost way to profit. Your risk is limited to the premium you pay, but your gain grows as the stock falls. Example Imagine a stock trading at $100. You buy a put with a strike of $95 for $3. If the stock drops to $85, your put is worth at least $10. That’s more than a 200% return, while risking only the $3 premium. This is why traders use puts as a substitute for shorting stock: limited risk, leveraged potential. Why puts matter These examples show the full picture: Hedging protects your wealth. Selling puts generates income. Buying puts gives you leveraged downside profits. Puts complete the options toolkit, giving you flexibility and control in every type of market. What’s next: Tomorrow I’ll share a training video that brings this all together. You’ll see how to start building your own personalized trading plan in the Beginner Bootcamp, the perfect starting point for options traders. Trade On, Micah PS. Puts are not just about betting against the market. They are about choice, control, and having more ways to shape your trades. Tomorrow we’ll walk through what I call the full traders playbook for calls and puts. More soon.   Micah Lamar CEO WallStreet.io Micah@WallStreet.io Questions? Please email us at Support@WallStreet.io or Chat with us 1-on-1 at WallStreet.io WallStreet.io All Rights Reserved © 2024 Manage Email Notifications Thank you for being a part of our community. Please use the social links below and spread the word. We appreciate you! Thanks in advance.