I have been investing for years, but I have never explored options because it seemed like gambling to me. Now that I’m a bit older, I’m curious and have been looking into it, but I’m not sure that I understand it fully.
Now, I understand how options work mechanically, but I’m not entirely sure how they work in actuality.
Let’s say I’m looking at Capcom (COOEF, not sure if I can actually buy an option on this but it’s the company that spawned the thought). Their recent game Dragon’s Dogma 2 has been reviewed poorly, so I’d expect their earnings report to be lower than expected. In this case, I’d buy a put. Here is my confusion.
Where would the earnings be coming from if I were successful? Who pays me?
How do I actually exercise the option? Or do people usually just resell the option they bought?
Is the above logic how options trading works, or are people generally going off presumptive metrics like yield curves?
Thanks in advance! I’ve never looked into it, so the logic around options has never concerned me before.
