10 Trades We Are Thankful For
tastytrade logo
Options JiveBuying Puts | Sep 16, 2016
Up Next
    Options JiveBuying PutsSep 16, 2016

    A trader with a bearish bias in an underlying can buy Puts in which his profit potential is practically unlimited or can short Calls for small but usually consistent profits. As Tom noted, “What we’ve learned is that if you limit profitability you raise your probability of success. Is there a situation where you would go long Puts for unlimited profitability?”

    Our study was conducted in the SPY (S&P 500 ETF) using data from 2005 to the present (3000 Occurrences). We compared selling the 30 Delta Calls and holding to expiration versus buying the 16, 30 or 50 Delta Puts and managing winners at 50%, 100% or 200% of the Debit paid.

    A table displayed the average P/L per trade results for the short Calls and the long puts with no management and managed at the levels listed above. Selling premium in the Calls was profitable. None of the long Put strategies were profitable or able to overcome Theta (time decay). A second table just of the various Put strategies but filtered for instances when Implied Volatility (IV) was low (as measured by a VIX below 15) was displayed. Once again, over the long-term all the long Put strategies were losers.

    For more information on Long Call & Put Premium see:

    Watch this segment of Options Jive with Tom Sosnoff and Tony Battista for the important takeaways and the detailed results of our study comparing a strategy of short Calls versus long Puts of various levels and managed at various levels.

    More like this

    tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on 

    tastytrade is a trademark/servicemark owned by tastytrade.

    tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”).

    tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with tastytrade (“Marketing Agent”) whereby tastyworks pays compensation to Marketing Agent to recommend tastyworks’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastyworks. tastytrade is the parent company of tastyworks. tastyworks and Marketing Agent are separate entities with their own products and services. tastytrade has different privacy policies than tastyworks.

    Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

    © copyright 2013 – 2022 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.