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Buy Puts
The purchase of a put is the simplest of options strategies.
It provides the right without
the obligation to be short a future contract at a
designated strike price, for a premium.
Because a premium is paid the futures market must move lower for a profit
to be possibly realized at expiration . It is a bearish directional strategy with limited risk and unlimited reward.
Breakeven point at expiration occurs when futures price equals strike price, plus premium paid.
Maximum profit = unlimited only to the extent in which the futures market can move.
Maximum loss = premium paid.
- In The Money: strike prices is greater than futures price.
- At The Money: strike price is at or near futures price.
- Out Of The Money: strike is less than futures price.
- Delta is negative. Lower prices help.
- Vega is positive. Higher implied volatility helps.
- Theta is negative. The passage of time hurts.
