I study quite extensively about derivatives such as option.
If you think a share is going to go down you can either sell a call option and pocket the premium which is a fixed value or if u feeling a bit more daring you can buy a put for an even grater upside.
options are prices by economic supply and demand bid/ask but there are underling principals.
These principals can be used to determine an theoretical price. The most famous and well known of them all is the black scholes formula which use's differential stochastic equations and random walk theory. Other possible methods are the put-call parity and binomal methods.
It is a fascinating field that alot of ppl tend not to touch. However if u got it right its much cleaner and less manipulated and cut throught then the share market.
You can also design synthtic instruments like collars that put and upper and lower limit to the share price instead of only one limit like a call or a put.
