Do you have a recommendation for a good reference to learn all this lingo? I understand what a short is, but WTF is a 'put'? 'Straddles'??? 'Unhedged longs'?
A put is an option that gives you the right to sell a stock to someone by a specified date at a specified price. If you buy a put, you are betting the stock price will go down.
A straddle involves buying both a call and a put. If a stock is trading at 10, and you buy a PUT at 8 and a call at 12, you make money if the stock goes above 12 or below 8, between that, you eat the option price. Basically a straddle is betting on volatility.
You can also sell a straddle, sell a put and sell a call, and bet that stock will remain at the same price.
A straddle involves buying both a call and a put. If a stock is trading at 10, and you buy a PUT at 8 and a call at 12, you make money if the stock goes above 12 or below 8, between that, you eat the option price. Basically a straddle is betting on volatility.
You can also sell a straddle, sell a put and sell a call, and bet that stock will remain at the same price.