Put vs. short and leverage | Finance & Capital Markets | Khan Academy

Put vs. Short and Leverage. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/derivative-securities/put-call-options/v/call-payoff-diagram?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/derivative-securities/put-call-options/v/call-option-as-leverage?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Options allow investors and speculators to hedge downside (or upside). It allows them to trade on a belief that prices will change a lot--just not clear about direction. It allows them to benefit in any market (with leverage) if they speculate correctly. This tutorial walks through option basics and even goes into some fairly sophisticated option mechanics. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy

Comments

1. Under the Shorting scenario, your 'Gain' would be $55 and not $30, right? You also get your upfront investment of $25 back once you have returned the stock after buying back. Gain% thus being 220%.
   
   Other way of looking at it is, you had $75 to buy back like you mentioned in the video, then you buy back at $20 - so you should be left with $55 at the end. Hence gain % would be $55/$25*100 = 220%.
2. So put is better than short?
3. If the underlying stock price gets to $41, you lose 100% (the $5) with the put but earn $9 with the short.. the put looks better in this video because the price moved so much (from $20 to $80). In reality where stock price seldom go up and down so much, the short can sometimes be better.
4. Hey Sal, a bit of a technical comment. I noticed lately in your videos that your pointer is invisible. Because of this it becomes a little hard to see where you are writing, specially when the screen becomes busy with information.
5. This video is corrupted on my end.
6. Agreed, I look forward to getting back home so I can watch these new videos. Although I have to say that since I started doing some other reading and research on our financial markets, and how they operated during the financial crisis in particular, I'm beginning to wonder if they have any real value -- or at least, any value that justifies the enormous liability they can become. It gives this sort of info a slightly sour taste.
7. Nice finally some Financial video's again!!