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Dear John sir,
If am bearish on a stock and decide to buy a Put Option then should not my position being termed as “Short Put” instead of Long put. My understanding is that Long stands for a bullish position and short for a bearish position. and hence buying of a put option should be termed as short put, which is sadly not the case.
Now am getting little muddled.
Hope you can help me out!
thanks!Before I relate this to options, if you buy shares in the expectation that the price will increase and so you will make a profit by selling them later, then you are in a long position.
If you sell shares in the expectation that the price will fall and so you will make a profit by buying them later, then you are in a short position.In the same way, if you buy either a call or a put option, then you are in a long position. That is because you have bought something (the option) and are holding it in the hope of making a profit when it is exercised (or that you will be able to sell the option later at a higher price).
The person writing the call or put option is in a short position. They are hoping the value of the option will fall and therefore they will have received more when the write it (or sell it) than they will need to pay out later.
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