I thought I'd have a go at a long put using an index based exchange traded option (e.g. XJO). I have no idea what I'm doing really, but thought that this would be the least risk being cash settled.
Could someone give me the basics of how this would work? I don't think I need to know about the ins and outs of options (Greeks etc.?), but am just interested in taking a bearish position on the ASX. Is an index ETO the way to go in this case?
As an example, it doesn't matter what put option I choose on CommSec, if I buy 1 contract for $1 then it costs $1000. I thought the contract size was $10, so where does the 100x multiplication come from?
Also, am I right in thinking that a long put is worth $10 for each index point below the strike price at the expiration date? Is there (more) money to be made before the expiration date, or, if the index is going the right way, is it better to hold on?
I'm feeling a bit thick, as you can imagine.