Priceline Group Inc (PCLN) Options Are a Bargain as Company Eyes Cuba
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If you like the idea of doing short-term trading pcln options traders stocks, options can give you a great way to do it. Actually, several great ways. It takes a pretty fat wallet to trade these stocks. Using options, though, we can trade them with much less cash out of pocket.
If we believed that PCLN was likely to run out of gas here and take a drop, the way to capitalize on that in the stock market would be to sell the shares short. If the price then dropped, we would buy the shares back later at a lower price for a profit. If the stock went up instead of down our short position would pcln options traders into the red.
Sounds pretty good so far. The high price of the stock makes it tough though. To sell short a hundred shares, we would have to put up margin equal to half of the value of the stock. And with a short stock position there is the nagging possibility of an upward overnight price gap. Options can help here. The most pcln options traders way to play this would be to buy a put option. While still a pretty good chunk of money, it was a small fraction of the share price.
And, when we buy puts the most we can lose in any pcln options traders, even if the stock doubled overnight, would be the cost of the puts. With the short stock, the theoretical loss is unlimited.
For many people, the put would be a pcln options traders way to play the potential downside on this expensive stock. Disclaimer This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader.
The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results pcln options traders be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.