I don’t find shorting stocks that scary as long as you have a stop loss and stick with large caps (large caps coz it would take a lot of capital to move say microsoft so you’re less likely to be caught off guard). And of course you have a stop loss so the theorectical risk of infinite loss becomes … well hopefully just theorectical.
But options are useful too. I think we’ve all been in situations before where you bought a stock, then the stock went down and triggered your stop loss; then the stock turned back up … the issue I have is time value. What’s considered a “cheap” option ? Is there a way to tell ?
I looked at the Jan 07 LEND put options with strike=$35.00
With stock trading at $33.44, the latest ask price for the option was $4.50 (so the intrinsic value is $1.56 and the rest is time value). And to profit, LEND has to go below $30.50 or -8.8% by January.
Is there a standard or convention with which I can judge if the option is priced too expensively ?
And sometimes I see 2 options for the same month & strike. Like LEND has ODQMG.X and QFWMG.X and both have strike=$35.00 for the month of Jan 07. Does anyone know why ?