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RE: [HIT 002] 3Q17 Options Trading
Long and short are the same in options as in stocks. Being long means you buy the thing and sell later. Being short means you sell it first (go negative) and then buy it back later.
For short, think of the US Congress. One bet on the national debt is that the economy will grow and dollars will be worth less later. Just like the price of a house from 1987 price vs today.
As for options, selling them lets you collect the premium over time. I'm working on a separate post about how I use Short Put spreads/verticals to make money.
OK i always sell the option to collect the premium. I rarely buy it back before it expires unless the cost has gone to less than $0.1 ie $1 to buy it back. Fidelity will do that trade for free. I only generally do it if i need to release the funds to be able to do another option sooner. But life usually gets in the way and the options expire more often than i buy them back early.
Please check out the next post, [HIT 003] Position Types-Short Put Vertical. It explains why I use it instead of just a short put. There are 3 quick reasons: