Post #3735 by JohnIII on the Mechanical Investing board

Investment Strategies / Mechanical Investing ❤

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Yes, there is always a problem with going short, whether selling puts or selling stocks short. Your gain is limited while your loss is unlimited. all the handwaving in the world doesn't make that fact go away.

How about this handwaving: I purchase a put. I can't lose more than the cost of the put. As an example I've done the following: For a stock trading at $7/sh I purchased an in the money put with a strike price of $12/sh for about $5.2/sh, which was the most I could lose. Most I could make, if the stock went to $0, was $12 - $5.2 = $6.8.

John

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