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Hi,
i’m getting confused on when to sell or buy options(either for investments in shares or currencies and interest rates). please check if my understanding is okay:
we sell call option if we anticipate the decrease in wealth( i.e expected fall in share price,strengthening foreign currency against ours and increase in interest borrowing rate/fall in interest deposit rate)… and we buy call option when the opposite happens.
we sell put option when we anticipate increase in wealth. we buy put option when there is expected fall in investments.
so, in combination, selling put option is buying call option and selling call option is buying put option.
is this right?
thanks, john.It is right apart from your last sentence.
Selling a put option may have the same effect as buying a call option (and be done for the same reasons), but they are not the same thing 🙂
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