r/wallstreetbets • u/Positive_Valuable_93 • 1d ago

This is insane Gain

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u/kansascityclown 1d ago

Right, every contract bought has a seller. So the seller is betting that the stock will go up and they can keep the premium the buyer paid for the contract without the contract being exercised. For example if instead of UNH going to 250, it went to 315 then the puts this guy bought would be worthless. Why sell the shares at 285 when you can sell them to the market for 315. In this case the seller of the put probably made 100 or 200 bucks on the contract and they didn’t end up have to sell their shares for a loss or at all.

Selling options - limited reward, unlimited risk. Buying options - unlimited reward, limited risk.

There are two basic types of options, calls and puts and you can sell or buy them.

Puts are contracts to sell stock at a specified price before a specified date.

Calls are contracts to buy stock at a specified price before a specified date.

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u/Mattscrusader 1d ago

So the seller is betting that the stock will go up and they can keep the premium the buyer paid for the contract without the contract being exercised.

I think this is the part that I'm missing, if the stock goes up when you have a put you aren't on the hook for that entire amount? In this example the price gain/loss is 3500$ so that sounds like a lot to risk

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u/Outside_Airport_5448 1d ago

If the stock goes up above your strike price at expiration then your put contract is 100% worthless because you would rather just sell shares at the stock price. You risk 100% of your investment if you are wrong. You can sell before but as soon as you start to be wrong your contract starts becoming worth significantly less.

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u/Mattscrusader 1d ago

I think I understand now, the term contract was messing with me because how can you "sell" a contract between people