Investment Type: Debit
Strike Prices: ITM/ATM/OTM
Expiration Month: Same expiration months for all legs and should be current month
Composition: Buy Put

Buy Put is another basic and simple strategy that let us make profit during market downturn. We can even make more profit during market crash, which best demonstrates the versatility of Options trading.

Normally when market rally, it will do so in a steady manner, but when market crashes, Billions of dollars could be wiped out in 1 to 2 days time. If one can successfully spot a market crash, he/she will definitely make a lot of profit in such short amount of time with Put Options. Other than a strategy to use during market crash, a lot of investors use Buy Put strategy as a safeguard (or insurance) for their portfolio to protect from market downturn.

Buying ITM Put provides us with more probability to make profit but less amount of money made while OTM Put Options let us make significant profits (in the area of three to four digit percentage) but less probability as stock prices need to move down more in order to make our OTM Put become ITM Put. ATM Put Options stands between the two. Therefore it is very subjective on which strike prices should we choose as it really depends on the trader’s perceptions and predictions.

Bear in mind that we as a buyer don’t have the obligation to exercise. Rather than exercising it to sell the stock, buy it back again in the market for profit, we can just simply sell the Options back. (Which requires less money and less hassles)