I know you guys aren’t financial advisors, but the husband is doing something I don’t understand. He’s planning on buying Disney stock so that when it tanks he’ll profit. The rest of our money is in DWAC, 1000 shares. Is what he doing safe?
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No stock investing is safe, especially if you don't understand the investment.
But if you know a stock will tank, you can buy a put (an option not a stock), which is an option to sell the stock at a fixed price for a limited window of time. Or you can sell the stock short, which other commenters have already mentioned. If the stock does tank, either strategy will make profit.
Thank you. That’s what he’s doing buying puts. He’s wanting to buy puts in Disney. I’m worried that he’s throwing money away although I agree Disney is going down
The cost of the put options (sometimes called sell options) is the entirety of the risk. Buying an option is generally low cost, a small fraction of the stock's share price. If the price drop exceeds the cost of the options (+ commission) by the time the option expires, the strategy will make money.
I’m grateful to you for explaining. I’m clueless about the market. If you don’t mind, would you comment on his choice of Disney for the puts? Just would be interested in your opinion. He’s going to do what he wants, but I would be interested
Politically Disney is heading downhill. I wouldn't buy Disney, on that alone. But selling an option depends entirely on the price and the time period, which your husband will know. The investment could be really stupid or really smart depending on those variables. I'm afraid I don't care enough about the stock to be informed about it, so I can't give you an informed opinion.