0
What is the difference between shorting a stock and buying a put?
Wiki User
∙ 10y ago
Safety.
If you short a stock, you borrow it, sell it, wait till the price drops and buy it back. Problem is, if you're wrong you lose money buying the stock back. And if the stock takes off like a rocket, you lose a ton of money.
If you buy a put (for this you normally get a naked put - one where you don't own the underlying stock), being wrong only costs you the premium.
Wiki User
∙ 10y ago
Wiki User
∙ 13y agoA put gives its buyer the right, but not the obligation, to sell something for a certain price. The put seller is the "long," the buyer is the "short."
The difference is, a short put is someone who owns 100 shares of Acme and wants to protect himself against the price falling. A naked short put doesn't own the stock and is just trying to make money.
Under automated trading, if the option exercises and you're in a covered put, the shares will be removed from your brokerage account and placed in the long's account, and the money he owes will be removed from his account and placed in yours. If you've got a naked put going and it exercises, the money will be removed from the long's account immediately. The brokerage will then buy enough stock to meet your obligation, deposit it in the long's account, remove all the transaction fees from the remaining money, and put what's left--if there is any--in your account.
Add your answer:
Earn +20 pts
What is long and short at the same time?
its medium
What are the difference between buffer stock and safety stock?
no difference
What is the difference between a stock or commodity broker and a stock or commodity trader?
A Trader is someone who buys/sells stocks or commodities. A Broker is one who helps the trader in his buying/selling
What is the difference between stock and inventory?
The difference between stock and inventory is that stock is what you have if you're selling items. Inventory includes what you have as your belongings.
What is the difference between a unit of stock and a share of stock?
No difference. A unit of stock is called a share.
What is difference between stock and a scion?
the difference between scion and stock is that scion is the cut stem of a plant while stock is the stem attached to the ground
What is a stock brokerage?
A stock brokerage is the intermediary between someone selling stock and someone buying it. A stock brokerage is the middle man between stock sellers and stock buyers. They are the ones that 'broker' the deal between the two parties.
Jared bought one share stock for 225 and made a A profit what was the selling price?
Jared sold the stock for a price of 225 + A. Profit is the difference between the cost (buying the stock) and the revenue (selling the stock). So, if you add A to the cost of 225, you'll get the selling price.
What is the difference between the australian stock exchange and the american stock exchange?
The difference between that Australian stock exchange and the American stock exchange is that they are based out of two different countries: Australia and America.
What is the difference between dealer and stock markets?
differance between stock market and dealer market?
What's the difference between the 1938 Stock and the 1959 1962 Stock?
The difference between the 1938, 1959 and 1952 is that it has been progressively modernized.
What is the difference between short selling and naked short selling?
Short selling or "shorting" is the practice of selling a financial instrument that the seller borrows first (does not own), and then purchases it later to "cover the short". Short-sellers attempt to profit from an expected decline in the price of a security, such as a stock or a bond.Naked short selling or "naked shorting" is the practice of selling a stock short, without first borrowing the shares or ensuring that the shares can be borrowed as is done in a conventional short sale.
