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With PUT options you are also expecting the value of the stock to go down, however you have to be correct in not only the direction, but timing.
I would only add one thing to this...magnitude.
When you "short," you have to be correct on direction only.
When you buy a put, you have to be correct on direction, timing, and magnitude.
By magnitude, I mean "how far will it move?"
Example: If you have some June $20 strike puts on Crapstock.com, and you also hold the June $17.50, one can be right and the other wrong.
If CRAP drops from $23/share to $18/share by the June expiration, you got the direction correct, and the timing. You were correct on magnitude on your $20s, but wrong on your $17.50s.
You got paid on your $20s, but your $17.50s went to put heaven.
Options are quite simple, dangerous, and lucrative. One thing I can guarantee is that you will never be bored when trading options.
It is death by 1000 cuts most of the time. However, when you get paid, it is like pulling off the "Brinks Job."
