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Chapter 7. Option Strategies in Down Mar... > The Long Put: The Overlooked Option

The Long Put: The Overlooked Option

The tendency to favor long calls over long puts—a common phenomenon among speculators—arises from the tendency for investors to be optimistic. Realistically, we know that market values rise and fall, but those who speculate in long options invariably believe that a stock's price will begin rising immediately after they buy a call. It is relatively rare for speculators to consider buying puts in the belief that the stock will fall in value.

This generalization applies to most, but not all, speculators. However, because so much emphasis is placed on calls, long puts often are overlooked and at times undervalued as a result. Your conservative risk profile may present situations in which buying long puts not only makes sense, but conforms to your standards as well.


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