What conditions lead us to choose to be buyers？

  1. When the fluctuations of a company’s stock are very clear, and we are highly confident in our judgment, we can act as a buyer to maximize our gains. This involve purchasing call or put options.

 

  1. If we predict that a company’s stock will experience significant volatility in the future but are unsure if it will be a sharp rise or a sharp decline, we can choose to be a buyer of straddles or strangles. These strategies allow us to profit when prices rise or fall dramatically, much like the options strategy I used when GME was at its price peak.

 

  1. If you enjoy capitalizing on major market movements and have a certain gambler’s mindset, but want to avoid unlimited potential losses, being a buyer of options can be a safer approach.

 

  1. If you hold stocks for the long term and anticipate negative news that may cause a price drop, you can act as a buyer by purchasing put options for hedging. This way, even if the stock declines, the gains from the options can offset your losses.

 

  1. When market volatility expectations increase, if you anticipate that the implied volatility of the market will rise, purchasing options can be beneficial. The value of options typically increases with rising implied volatility, even if the underlying asset’s price does not change significantly. If the market is calm, but you expect future news to stimulate the market or foresee upcoming opportunities, you can spend money to lock in uncertainty. When investor enthusiasm rises and implied volatility increases, even if the underlying stock remains unchanged, the price of options will still increase, allowing you to sell for a profit compared to when you bought in.

 

Case in point: if an option is priced at $2, and you expect that the option has a greater chance of becoming more valuable in the future, you can purchase it. If the market recognizes its potential, with the underlying asset unchanged, and implied volatility rises, your option’s value may increase from $2 to $3. At this point, selling would yield a profit of $1.