InvestorQ : How does buying a put option compare with selling futures on a stock?
Debbie Mascarenhas made post

How does buying a put option compare with selling futures on a stock?

Answer
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Crowny Pinto answered.
2 years ago


Let us assume that you expect the stock price of Tata steel to fall from Rs.720 to Rs.600. That is a sharp correction of over 16% and as a trader you can surely play the stock through the derivatives market. There are two ways to play it. You can either sell futures of Tata Steel in the current month or the next month contract. Alternatively, you can buy put options of a suitable strike. But, that is not the challenge. The real challenge is when you should play this downside in the stock using put options and when you should sell futures.