Article Bargain-Hunting with Options

T2W Bot

Staff member
One creative way in which put options can be used is to buy a desired stock at a discounted price.
This strategy works best when a stock has recently had a sharp drop, to a point that you believe is a bargain price. It will allow you to buy the stock at a discount from the current market, if the stock behaves as you expect. And if the stock suddenly soars, you may make a tidy profit even though you missed buying the stock. Here’s how it works.
When stocks drop sharply, some of the people who hold them buy put options as protection. From their point of view, they are buying a guaranteed stop-loss. This increased demand for puts drives up their price.
A savvy investor can then sell put options on the stock in such a way that the only possible outcomes are

Purchase of the stock at a significant discount to the present market price or
A high return on the cash that is committed to the potential stock purchase.

Example Put Option Trade
*Example only, not a trade...

Continue reading...
Last edited by a moderator:


Legendary member
Good to have a reminder of an important general principle, to always keep an eye on the bigger picture.
AdBlock Detected

We get it, advertisements are annoying!

But it's thanks to our sponsors that access to Trade2Win remains free for all. By viewing our ads you help us pay our bills, so please support the site and disable your AdBlocker.

I've Disabled AdBlock    No Thanks