Is there a calculator I can use which tells me the difference between selling a put contract vs selling a borrowed stock.
Say I want to short a stock, I can sell a ITM call or buy ATM put contract, but I can also borrow stock from my broker and sell that now and return it by buying it cheaper later. There are risks to both of these but I am more interested in knowing under what circumstances does the latter makes more sense?
The math between selling a borrowed stock vs buying a PUT options.
byu/pfc-anon inoptions
Posted by pfc-anon
2 Comments
Theres plenty of option calculators like optionstrat.
Just use that and compare to short in your head since the math on short is pretty simple.
Imo its always better to buy a put unless the iv is insane and even then maybe just stay out.
Too much risk on a short.
Plus with puts you could also win if iv just increases.
Id recommend deepish itm far out dte puts. Its like the opposite of a leap. Gives you pretty close to a shorting experience.
Buying the put is the only version that doesn’t end up with a large loss if the underlying moves up sharply instead of down like you wanted. You lose what you paid for the option, but that’s it.
As mentioned, if you reduce the volatility factor with time and ITM gap, you can get delta pretty close to 1, so you get most of every dollar the underlying moves down.