Ask HN: How Do Puts Work?

https://news.ycombinator.com/item?id=22876085
by champagneben • 6 years ago
1 0 6 years ago

I'm reading about Mark Spitznagel and Universa Investments, and in an article they put it as follows: 'his trades, which cost almost nothing to put on during good times, can be sold at almost infinite prices.' Why?

If the price of stock A is now $20, and the put gives you the right to sell at $30, wouldn't the put be worth $10? Or was at nearly infinite prices just an exaggeration? But even then I'm having a hard time understanding the massive returns they've claimed, unless there's lots of leverage involved.

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