Ok.
Let's say I am interested in the short term future of company ABC. I am plotting to do something disruptive to it, to cause the stock to fall.
However, unlike LeChiffe in Casino Royale, I do not have the resources to simply short the stock (that would require a big margin account, and this character is small potatoes). So I am thinking about buying put options.
So the stock is at $100. The $100 put option is $2.00
For $1000 I could buy 5 contracts ($2.00 *100 shares/contract * 5 contracts).
I do the dastardly deed, and the stock drops to $70.
Ok, now, if I wanted to execute those options... Do I need to first buy the underlying stock at 70, or could I execute them and use the proceeds from the short to pay for the long position?
My character's belief is that he could make a quick $14,000 with this plan if it works (5 contracts * 100 shares * $30 profit per share = $15000 - the $1000 spent on the options) without having to have the $35,000 he'd have to have to buy the long positions first.
Anyone have experience with this trading strategy?
Let's say I am interested in the short term future of company ABC. I am plotting to do something disruptive to it, to cause the stock to fall.
However, unlike LeChiffe in Casino Royale, I do not have the resources to simply short the stock (that would require a big margin account, and this character is small potatoes). So I am thinking about buying put options.
So the stock is at $100. The $100 put option is $2.00
For $1000 I could buy 5 contracts ($2.00 *100 shares/contract * 5 contracts).
I do the dastardly deed, and the stock drops to $70.
Ok, now, if I wanted to execute those options... Do I need to first buy the underlying stock at 70, or could I execute them and use the proceeds from the short to pay for the long position?
My character's belief is that he could make a quick $14,000 with this plan if it works (5 contracts * 100 shares * $30 profit per share = $15000 - the $1000 spent on the options) without having to have the $35,000 he'd have to have to buy the long positions first.
Anyone have experience with this trading strategy?
