Buying Put Options on Robinhood - Trading Options Example

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What Is a Put?
A put is an options contract that gives the owner the right, but not the obligation, to sell a certain amount of the underlying asset, at a set price within a specific time. The buyer of a put option believes that the underlying stock will drop below the exercise price before the expiration date. The exercise price is the price that the underlying asset must reach for the put option contract to hold value.
A put can be contrasted with a call option, which gives the holder to buy the underlying at a specified price on or before expiration.
The Basics of Put Options
Puts are traded on various underlying assets, which can include stocks, currencies, commodities, and indexes. The buyer of a put option may sell, or exercise, the underlying asset at a specified strike price.
Put options are traded on various underlying assets, including stocks, currencies, bonds, commodities, futures, and indexes. They are key to understanding when choosing whether to perform a straddle or a strangle.
The value of a put option appreciates as the price of the underlying stock depreciates relative to the strike price. On the flip side, the value of a put option decreases as the underlying stock increases. A put option's value also decreases as its expiration date approaches. Conversely, a put option loses its value as the underlying stock increases.
Because put options, when exercised, provide a short position in the underlying asset, they are used for hedging purposes or to speculate on downside price action. Investors often use put options in a risk-management strategy known as a protective put. This strategy is used as a form of investment insurance to ensure that losses in the underlying asset do not exceed a certain amount, namely the strike price.
In general, the value of a put option decreases as its time to expiration approaches due to time decay because the probability of the stock falling below the specified strike price decreases. When an option loses its time value, the intrinsic value is left over, which is equivalent to the difference between the strike price less the underlying stock price. If an option has intrinsic value, it is in the money (ITM).
Out of the money (OTM) and at the money (ATM) put options have no intrinsic value because there would be no benefit of exercising the option. Investors could short sell the stock at the current higher market price, rather than exercising an out of the money put option at an undesirable strike price.
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#OptionsTrading #BuyingOptions #PutOptions
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DISCLAIMER:
This video is for entertainment purposes only. I am not a legal or financial expert or have any authority to give legal or financial advice. While all the information in this video is believed to be accurate at the time of its recording, realize this channel and its author makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this video.
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[@JakeBroe]

Give this video a LIKE to support my channel! Also check out my entire playlist on Trading Options here! kzbin.info/aero/PLscTZuOqKWIxSZzy4ObKWDznEsCot_1HU

[@Imjustright]

hello, I am just trying options trading. Today I bought a put option for s&P bear 3x. it went up 83% almost instantly somehow. i got excited and tried to sell, so i pressed sell on my phone. for some reason it only gave me 7ish dollars, so i lost 62 dollars. this was because I didn't know how to sell options. this video showed me. i will try again in a few days and report back how it went. also, would you recommend a put for this stock? I figured over a few months this was a safe bet.

[@ryanmcgregorr]

Jake, I've been binging the videos in your options playlist for the past week and they're incredibly helpful! I just made $13 (~12% ROI) on my first options trade this morning. It's not a lot, but it's a great start because I understand what I'm doing thanks to your videos haha.

[@JakeBroe]

That's awesome! Congrats Ryan!

[@ryanmcgregorr]

@@JakeBroe Thank you! I have some friends interested in learning options so I'll definitely share these videos with them. Hope you're doing well. 🙌

[@chinchowpowpook]

Today, are u still doing option and make more?

[@ryanmcgregorr]

@@chinchowpowpook Yes. I mainly trade vertical spreads and sell covered calls on stocks that I own. I've learned a ton since leaving this comment - including by making mistakes - but if you keep with it, it's 100% possible to be consistently profitable.

[@SwertPertoto]

I have watched so Many videos and still confused. You literally just explained it like I’m 5 and I understand. Great job !

[@johnsummers8063]

FINALLY! Somebody who explains how to BUY a naked put and how it works vs. SELLING a naked put. I know all about SELLING naked puts (been doing it for a while now), but I couldn't wrap my head around BUYING a naked put. Thanks, great explanation!

[@dnevill]

Thank you for putting together a super concise video! That was EXACTLY the information I needed, and I'm glad you went all the way through the trade to see the resulting page! Very helpful 😁

[@nikolassilos_6227]

Just wanted to say I love your videos. I accidentally found them at 2 in the morning and started watching, got me really interested in stocks. That was a year and a half ago. I'm 15 now and YTD I've made 700% gains. Keep making the great videos!

[@JakeBroe]

Thanks nikolassilos! Glad you found the channel and happy to have you with us! Cheers!

[@ryannolastname8687]

After watching countless videos I finally found yours and it explained it perfectly just wanted to say thank you.

[@viveks2002]

I watched 10 or more videos. This is the best of all. You’re a genuine trader and thank you for actually showing how to trade options! Subscribed.

[@vastreyt1204]

This is the most comprehensive video I've seen about puts, def subbing and watching all your videos, tired of day trading and not getting my money's worth, thank you 👍

[@hannahmiddleton-vi8vn]

This was so helpful, thank you!

[@kaushalkishore2934]

I finally understand option trading after researching for 6 months, thanks to this video & placed my first order 🤞🏽

[@sydneyc8192]

Thank you so much for this! I just put in my first put order because of your video!

[@arowniop9338]

thx, first video about options that is clear

[@moyapr1449]

Hey being learning really slowly about stock market but with just this I've had a significant learn curve and can approach the market with waaaay more confidence. Thanks for the great video. I'm definitely checking all your videos.

[@real_bullish]

Best Long Put video I've seen, thanks!

[@dxologistics3601]

You should be an Investment professor, hell yeah, you just safe thousands of new traders money while trading instead of learning and losing.

[@sahhhbrahhh6408]

Can someone explain to me why I’ve seen people make money on a put they bought without the target price being reached. My understanding is the stock price needs to get below the target price to even break even. But I’m seeing people make a profit before that even happens.

[@kiranvangapally1699]

Thanks for a very nicely explained video on puts …one thing I’m not able to follow is that …if the price goes below the break even …do we have to buy 100 shares ..what if we don’t have the buying power

[@dorrion4x237]

So do you have to be able to buy 100 shares ? I want to play a put on nvda I can afford the 1110 premium but can’t afford 37,000 to buy 100 shares at the expiration date can someone explain please

[@THEREALPHRESHMEN]

I’m mad late but u would just sell the option and make the money like that…I think

[@SwampFoxe]

Very instructive..

[@JeffNix]

concise and recommended explanation -

[@dailyhomespr]

Excellent video. Very well explained.

[@Gabber44906]

When buying a PUT is this always out of the money? When buying a call is it always in the money? Is the ASK always buying a call, is BID always buying a PUT? Not sure I understand ask and bid.

[@adenbaksh4843]

So that max profit is just a number there for no purpose ??since the none of the companies will go bankrupt like that

[@zacharyruben1852]

I went back and looked at charts to see how you did on that play. Im sorry sir. Lol. I know the pain. However, the video was great and I feel my time was well invested. Ill subscribe. Thank you.

[@glendacooper2100]

I have a question. Ex: If the stock were trading at $100, and you knew the price would go down? Why do you buy a Put at $95 in 60 days? Why wouldn't you buy a Put at $100 in 60 days? Wouldn't you make more?

[@fville281]

Great job! Thanks

[@CarlosGarridoHQ]

Thanks for the info!

[@shaandadon2929]

Great info. Thank you. Can you trade option with cash account?

[@fifajjang77]

Hello Thank you for the Video Jake. I have a question. If I bought some put options (expiring this Friday), then it's showing I have +$200, what if I do not "sell to close" the position until the end of Friday? Will I automatically get the profit of +$200 by the end of Friday? Do I have to be obligated to buy that stock at the end of the Friday?

[@nenogirich]

Good explanation 👏

[@JakeBroe]

Thanks for watching nenogirich! Cheers!

[@alexchecof75]

What’s The difference between sell to close and exercising

[@dwalker6868]

Thank you

[@JakeBroe]

You are welcome D! Thanks so much for being a huge supporter!

[@GeeMoneyESE]

Is there a follow up video to for this option?

[@maverickmills1856]

Looking forward to more of this content!!

[@JakeBroe]

Thanks Maverick! More Robinhood investing videos are coming soon!

[@NupidsLo-FI]

so if you go to 177 before expiration your profit will be the 17k?

[@Bardmusic66]

I don’t think I’ll ever mess with calls and puts. Too much gambling involved.

[@cascadeanalog320]

Thanks

[@1fighisimo]

*isn't it better to buy ITM (strike above stock price) for long puts?*

[@amck72]

Two years made a difference with Catapillar, now their stocks have doubled.

[@TheLepec93]

Struggling with understanding the profitability. Do you only purchase the shares After buying the put option? Would you only buy a put option if you don’t already own those shares?

[@malcolmriley8493]

Far as buy to open and sell to close which one do you choose if you want to collect profit if your contract is ITM ?

[@thebeddoctor4273]

I'm confused. Isn't buying a PUT making money as the stock price goes down? You said since we are the buyer of the PUT we want it to go up.

[@eddiem4638]

He was referencing the market value of the option contract, not the share price of the stock. Hope that helps.

[@Blk_pantherfit]

So the higher the delta the more percentage of the money you gain from the stock if it goes up or down depending on call/Put is that correct!!

[@eduardazayev4230]

Would be nice also to know, what else you can do to minimize losses on this trade, or to maximize profit. Like, let's say buying or selling call, or spread.

[@JakeBroe]

I'll make more videos in the future about credit and debit spreads with Robinhood. Cheers Eduard!

[@richf2082]

at first i thought that the video was about buying puts on the robinhood stock itself which wouldve been quite prophetic by the end of the month lol

[@JakeBroe]

Haha, you are correct! Had I bought puts on Robinhood stock (on Robinhood), then I would have made a lot of money!

[@kevilpatel9967]

Much help 🤝🤝

[@Victorluca1290]

But can I sell the option even if it's cost 2 cents? Would somebody buy my contract? For example I don't want to convert into shares?

[@sammie2801]

What were the results?

[@chrisvinci5417]

Where is that sunset backdrop from? Been looking for something like that haha

[@JakeBroe]

Haha, it's kind of like an 80s retro. You can find it on Amazon "Tompop tapestry retro".

[@PatOffical.]

If i buy a PUT in the money and it stays below the strike does that mean it'll expire in the money?

[@PRHBxEaSyKill]

YESSSS 🙌🏽 Robinhood content

[@JakeBroe]

More coming! Cheers JCee!

[@shermansas]

How did you do on it?

[@GeeMoneyESE]

Wh where’s the follow up video of the trade?

[@alokjain8529]

So when it expires, and in the money will the broker automatically buy the shares at the strike? Or does the option just expire and we collect premium?

[@MrFartyman44]

So if you buy outs say robinhood says the max loss is $50. But what happens if you just let the pits expire? Does robinhood force you to exercise the contracts and buy the shares?

[@Ruben901]

I plan on getting more involved in Options once I gain $500 in profits....but not now....soon

[@JakeBroe]

No rush Ruben! Options aren't going anywhere!

[@dameyboi3924]

I need help. I know this is an old but it looks like you actually talk to your viewers. I just need you to walk me through one of each option. I will pay you for one session over the phone.

[@canpeltek5094]

Hi Jake, thank you for the videos, so helpful. Do you have any recommendation on how to close the options? As in, when I place an order for "sell to open" today (10/29) for 2 weeks from now (11/12), and assuming these options expire on 11/12 worthless, Do they expire at 4pm on 11/12? If so, then how can I repeat the process for another 2 weeks, I believe I have to wait until 11/15 to place a new order, is that correct? Or is there an easier/simpler way to roll this process.

[@JakeBroe]

Hey Can! If you did a "sell to open" order with a put, then you sold a cash secured put. This video was the other end where people were buying puts. But, you can "buy to close" your contract back at anytime to close it and then "sell to open" again if you like. If the contract expires out of the money on Friday, then yes, you'll have to wait until Monday to sell to open again as your collateral isn't freed up until Monday.

[@banderson1979]

Sold my first option today. Appreciate some feedback. TQQQ 10/29 Covered Call for 2.10 $139 Delta was 31% cost basis on my position is 129.

[@viv4477]

I'm new to the whole stock trading, I've been trading Crypto for the past 5 years and know I want to add more to my trading. I just don't under the max profits, how can you buy a put for price off x=100 dollars and the have a max profit of 1200. What determines the max price. Not selling and waiting for expiration and being under breakeven. Just trying to understand the verbiage. Understanding what every thing mean is difficult. Reading charts is a cakewalk compared to this.

[@Bardmusic66]

The max profit would be if the stock went to zero. In his example, the current price was 185 but the target price to make money was 179. He had bought 100 shares. 100 x 179 = max profit of 17,900. Your profit is 100x every dollar below your target price.

[@flobba123]

talk about a cat call

[@sergiovillarreal3688]

So, you lost all your money on this option, uh? Thats a bummer, I got burned on Apple options ;(

[@JakeBroe]

Hey Sergio, no, I didn't hold this option. I just used it as an example, not a real trade.

[@nickolefoss9704]

How do I trade puts if I don't own the stock

[@edwardm6276]

not watching this video specifically because robiinhood

[@JakeBroe]

No worries Edward! Lots of other great options out there!

[@jewittm]

… Jake the Ukraine war guy?

[@izzyh6739]

Bro you explain things very well. I knew these things but you dumbed it down and made it easy to follow. Thank you sir! 🫡

[@youkickedmydog0]

That put contract is down 35% today 🙄

[@JakeBroe]

Yep, the entire market shot up huge the last 2 days on bank earnings. Nothing specifically positive about CAT. It'll still go down (I'm betting) by the end of October when the market has another panic attack about the next Fed meeting.

[@what4687]

Helpful video thanks