this post was submitted on 07 Jan 2024
472 points (95.6% liked)
SNOOcalypse - document, discuss, and promote the downfall of Reddit.
4672 readers
1 users here now
SNOOcalypse is closing down. If you wish to talk about Reddit, check out !reddit@lemm.ee, !reddit@lemmy.world and !RedditMigration@kbin.social.
This community welcomes anyone who wants to see Reddit gone. Nuke the Snoo!
When sharing links, please also share an archived version of the target of your link.
Rules:
- Follow lemmy.ml's global rules and code of conduct.
- Keep it on-topic.
- Don't promote illegal stuff here.
- Don't be stupid, noisy, obnoxious or obtuse (S.N.O.O.)
- Have fun, and enjoy the popcorn! ๐ฟ
founded 1 year ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
"Calls" and "puts" are types of contracts about buying/selling stocks (they aren't the stock themselves but are centered around a given stock and its trading price, so they are called "derivatives" as they are "derived" from the stock).
A put is a contract that allows the buyer of the contract to sell stock at an agreed upon price to the seller of the contract, regardless of the current trading price. They are used for a variety of reasons. In one usage, someone who is buying some of the stock at the current trading price may also buy a "put" on the stock at a slightly lower price. This way, they spend a little more money at the time of buying the stock, but if the trading price plummets, they can still sell it at that slightly lower "put" price and not lose too much money.
In this case, the idea would be to buy a "put" (without buying the stock at the same time) when the buyer thinks the stock's trading price is overvalued. Then when the price falls below the "puts" agreed upon value, buy the stock at the lower price and immediately invoke the contract to sell at the "put"s higher price.