No. of Recommendations: 2
After costly debacle(s) with Tesla puts I told myself "Never again puts. Only calls". A friend with decades of experience in option trading (He doesn't do it anymore, saying it was a zero sum game for him, that he mostly was right from the direction, but wrong from the timing) replied "Why? It's the same whether you bet with puts on falling or with calls on rising prices".
Is it?
A) The max. profit with puts is limited (underlying shares don't go lower than 0).
B) If your options are not very short-lived time is more against you with puts than with calls, as companies with continuing profits over time become more valuable and stock prices in general therefore tend to rather rise than fall (the indexing argument).
Especially if you want to play the option game "safe" (what a contradiction in itself :) and buy the longest running LEAP's, expiring in years, because of B) time clearly is on the side of calls, not puts.
Maybe my fellow posters, especially those "playing" themselves with options, have comments?
P. S. : Just for entertainment purposes, here is my current reason for those musings: 1 month ago I bought a bouquet of SaaS puts, expiring in November. Perfect timing --- if I had bought calls instead! Saul with his frustrated post "Is this the bottom?" or so to which I then pointed here hit the bottom absolutely perfectly. So for 1 month now I watched those stocks rising and my puts sinking.
I am not convinced if continuing to hold I might not be vindicated in the end, but time value is running out@. So I am using every opportunity to get out of this mess with a blue eye only. That's possible because economic data currently do not favor SaaS stocks. Every few days for one or the other such company there is a Q1 earnings report saying not only the hypergrowth times are over, but partly even warning of lower earnings. That's why a few days I could unload Shopify nearly without a loss (2 days ago 10% down), yesterday Okta without a loss (nearly 20% down yesterday) and today probably S without a loss (yesterday 35% down). But while it's nice being able to avoid losses that's not exactly the purpose of the game.
So it seems for SaaS stocks the time of differentiation has come, of darwinian selection, with the strongest in a specific field like "endpoint security" taking everything (all the customers) and the losers withering away --- which of course makes the SaaS game much more challenging for Saul & Co. compared with the time one might have succeeded even if one had thrown darts. That's probably the reason why Saul now puts so much focus on traditional valuation.
