Selling Puts, Buying Calls: Not the Same Bet!

There seems to be a misconception that over the years I’ve noticed is pretty common among options investors and traders. It is that if the “best-case scenario” for a put seller is to see the underlying stock rise above the strike price he sold (implying a generally bullish bias), then a put sale must be an equivalent trade to buying a call option, which is also bullishly biased. The implication, then is that if you see somebody selling a put option on a stock, and you think their rationale for the trade has merit, but you don’t want to sell a put, you can just buy a call option instead. The truth is that the only thing these trades really have in common is that in the long run, they both seek to profit from an upward move in the underlying stock price. How they do it, how often they are able to do it, and how much risk each trade is taking actually put these trades at what I believe are polar opposites of each other. I want to use today’s post to elaborate on these differences and try to make it clear why I don’t encourage buying call options on the stocks I highlight for the Rebel Income system.