Anticipations
A strong, downward move in the underlying asset is anticipated.
Characteristics
Limited profit (stock price can not be negative) / limited loss.
Max profit - unlimited.
Max loss - limited to the net debit required to establish the position.
Creating
Buy a put option.
Example
Security(IBM) price - $100
Long 1 IBM 100 Put - $5.8
Max profit = unlimited
Max loss = $5.8 * 100 = $580
Option Position at Expiration
Comments
Buy OTM put option if very bearish, Buy ITM put option if less.
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