Hi all, i was hoping you can help clear some questions i had about options as im a noob and want to get a better understanding of how it works before i place an order. Lets say i believe in a scenario where the spy can go down to 350-330 and i place a put option at a strike price of 340 or so to expire in a month or two maybe even a little bit further out for a higer premium, what happens in a worst case 2008 style scenario where the market crashes even further than the price i expect it to, lets say it overshoots it by a lot and in a few days go down to 300 or even crazier like 275, what happens to my options? how do i sell a put option as it is now way higher than the price of the stock?
Usually in a put option the max loss is whatever you invested in that option and the gain can get better the lower it goes but if it overshoots my prediction of 340 and goes down another 50 or so why would anyone buy that put option at my price wouldnt the value change considering now the price of the stock is lower than my option? prolly a stupid question but would love some clarity/.
Another question i had is if i were to buy puts a couple months out and i make the bet that a worst case scenario will happen and spy will trade around 300, those options right now are incredibly cheap as there are no buyers in those ranges so is it better to make huge bets of crazy swings like that or do it as the market goes down? Basically for someone who thinks the market could go down a lot and is willing to lose the small amt of money i will invest to this scenario, how would you go about betting against the market?
FYI i aint bettin any life savings or gettin loans to make these ridiculous calls so dont worry, i got 1k or so extra income that im willing to lose 100% if this play inevitably goes bad for me and we reach ath in 2 months lol
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