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Author: lukascranac Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 482  
Subject: Re: DDD Put Date: 1/29/2013 6:35 AM
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cornellengr2008 says it right. I think you got selling and buying puts mixed up. its a very big difference! Since you got the terminology confused I don't understand exactly what positions you are holding.

If you sell (write) put options you are obligated to buy the shares at the strike price. if you wrote March $65 puts and the stock is trading at $50 on march 16 you will have to buy the shares for $65. If you don't have the money but you have other equity the broker can liquidate your other positions to satisfy your obligation. Alternatively you can close this position by buying back the put option. But since the option trades at $9 dollars now you lose a few hundred dollars per contract.

If you ask me I think DDD will tank in the next few days, build a bottom around $50, and it will take at least two months for it to get back to the $65-$70 level. Its hard to judge what's the best move for you. If you buy even higher than the market price and you keep it for a long run you can only win, just not that much. if you buy the option back to close you will definitely lose on the contract.

Options are for people who feel very confident in timing the stock price. You have to be absolutely convinced that the stock will trade around the strike your picked at expiration. If you are not that certain you are much better off simply buying the shares.
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