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Originally Posted by RedStripe
Anyways, to answer your question, the put is the option to sell at a specific price, so when I'm buying puts, I want to buy as the underlying asset is going up so as I'll be paying less for the put option. So as the DJIA was going up from 11,500 to 11,6XX, I was acquiring DIA options (DIA's are the ETF's that track the DJIA) with strike prices at 115. And after the DJIA crossed 11,600 I started buying the DIA puts with strikes at 116 (because now they were out of the money, thus less cheaper).
And when the DJIA drops below where it was when I bought the DIA put, I'll be in the black.
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Thanks for the clarification. Sounds like you doubled down on the cheaper puts - nice move.
Another question - when you exercise your options, do you have to actually have the shares of DIA to sell to the writer of the put, or does the TDAmeritrade handle that for you behind the scenes?