Could an investor just buy puts and make plenty on this market, because it is just headed down?
Answers: Yes you can just buy puts without owning the stock. FYI, it's usually cheaper on commissions to just sell the puts later, rather than to buy the stock at market and exercise the options.
Yes, if you pick the right stock or index.
If you buy a put without owning the stock, and win the bet, your broker should exercise it for you at options expiration, buying the stock at market and exercising the put. Confirm this with your broker to make sure your broker actually will, but I'd be surprised if he doesn't.
yes......have to get the right puts....
If I buy puts on a stock, am I not effectively paying extra for that stock?
Is it worth it?Answers: <<<If I buy puts on a stock, am I not effectively paying extra for that stock?>>>
Yes.
<<<Is it worth it?>>>
Usually not.
Buying puts covering stock that you own is an insurance policy.
It's like dictum you are paying extra for your house because you buy fire insurance.
You can classify it as paying extra for the stock if you want to, even if you've had the stock for 10 years and suddenly established to buy puts. I'd classify it as two transactions with different meaning.
put .option to go....
call .substitute to buy.....
the advantage ......not putting up closely of money...you can sell the CALL and generate a profit that way....
pick up a book or two on puts and call...
How do you determine how far out you want your put option in a spread to go?
Answers: Look at the greeks for the different expiries and pick the expiry that has the risk characteristics you find most attractive.
Every spread and every option is different. There is no formula that always works. You adjust as you go along.