Short Selling vs. Put Options: Betting on a Decline
How to Trade Options for Beginners: Covered Calls on thinkorswim® (YouTube link ) If you believe a stock price will decline, you can either: Short sell the stock, hoping to buy it back at a lower price. Buy a put option on the stock, giving you the right to sell the stock at a specific price if it declines. Key Differences: Ownership: With short selling, you borrow the asset. With put options, you buy a contract. Leverage: Options often provide leverage, allowing investors to control a larger position with a smaller capital outlay compared to short selling. Time Decay: Option prices are influenced by time decay, meaning the option's value decreases as it approaches expiration. Both strategies aim to profit from a declining stock price , but they carry different risk and reward profiles . Short Selling: Betting on a Price Decline Short selling is a trading strategy where an investor borrows a security (like a stock) and immediately se...