Buying puts on S&P 500 index

[blacksheep]

What the process in to buy 90 day puts on the S&P

Is there a way to trade the whole index.

Thinking Sept/Oct/Nov

Risks other than the loss of the option purchase price?

Please pardon the dumb questions, new to options.

Thanks in advance.

[PatColo]

http://bigcharts.marketwatch.com/quickchart/options.asp?symb=sp500&sid=3377&time=8&bars=none

If your brokerage acct isn't already margin/option approved, you'll need to apply by sending in a signed app, and it'll prolly take a week or so to upgrade the account.

[phideaux]

What the process in to buy 90 day puts on the S&P

Is there a way to trade the whole index.

Thinking Sept/Oct/Nov

Risks other than the loss of the option purchase price?

Please pardon the dumb questions, new to options.

Thanks in advance.

If you're new to options, play it on paper first or use a "demo" account. There is a lot to learn. :smile:

[azxcvbnm321]

Options are incredibly complex. You should formulate an overall strategy before you buy. The further out-of-the-money the option is, the less expensive they are in price, but they rarely pay off and are actually a bad value in that your expected loss from buying a far out-of-the-money option is higher than buying a near/at the money option. Basically they're a lottery ticket, they're cheap and can give you big returns if you hit, but most of the time you'll won't.

The closer the option is to expiration, the faster it loses value due to time decay. I would avoid buying options less than 3 months, but then my strategy is opposite of the lottery ticket method. Remember that you can buy a 6 month option and sell it 3 months later instead of purchasing a 3 month option and holding till expiration. I always sell far before expiration, you don't want time to literally eat away the value of your option.

I like to buy in-the-money options. They are actually "cheaper" in that the option itself costs less the further in the money you go, although you have to dish out more money because they are more in the money. My strategy uses options to gain more leverage than if I actually owned the underlying position (or short).

Damn there are a million things you can do with options and just as many strategies. It all depends what you want to do. Are you looking to gamble on a longshot? Or are you using the option to gain leverage and control more of the stock/index with the money you have?

Let me warn you that buying options, especially out of the money, shorter than 3 months to expiration options is an overall money loser. The aggregate from all the people who buy these options is negative, but if you are correct and the market moves in a big way, you can win big.

[ShinyThings]

To buy puts on the index directly, I believe you need a commodities/futures account which is frequently not available through regular discount brokers. If you plan on buying futures or options on other commodities (like oil, corn, or eurodollars), it may be worth your while to open an account with a commodites broker. But a way around opening one of these accounts is to buy puts on IVV (iShares S&P 500 index ETF) which can be done through your regular stock account. You still need to be approved to trade options, though. You might need to fill out a form with your brokerage.

ST

[phideaux]

To buy puts on the index directly, I believe you need a commodities/futures account which is frequently not available through regular discount brokers. If you plan on buying futures or options on other commodities (like oil, corn, or eurodollars), it may be worth your while to open an account with a commodites broker. But a way around opening one of these accounts is to buy puts on IVV (iShares S&P 500 index ETF) which can be done through your regular stock account. You still need to be approved to trade options, though. You might need to fill out a form with your brokerage.

ST

For S&P options, you wouldn't need a commodity/futures account, just an Options account.

The goobermint requires that you fill out a form and disclose your assets and income in order to "prove" to them that you have enough money so that you won't go on welfare if you lose your ass trading options.

[Tragedy Trousers]

Have you considered a Inverse ETF?
http://www.proshares.com/funds/sds.html

[ShinyThings]

For S&P options, you wouldn't need a commodity/futures account, just an Options account.

Could you give the symbol for one of them? Can't seem to find it online.

ST

[phideaux]

Could you give the symbol for one of them? Can't seem to find it online.

ST


Here are the SPY options on Yahoo. http://finance.yahoo.com/q/op?s=SPY

[Ted Nielsen]

Be very careful, index options settle in cash when they expire. Which means if you're out of the money they don't expire worthless like stock options the difference is taken out of your account and credited to another account.

Example: The option SPYXP is the December 2008 120 S&P 500 put. The current asking price is $6.45(according to Etrade). 1 contract is 100 units of SPY so 1 contract can be purchased for $645. If the S&P 500 is at 1100 when the contract expires the contract is worth $1000 if the S&P is at 1300 when the contract expires the holder is out $1000.

Here's some good info: http://www.optionseducation.org/resources/literature/files/understanding_index_options.pdf

[mnmnmmnnmnmn]

i wonder if there's anybody using option as a hedging method to provide some kinda protection of investment.