Options Trading : Selling Puts for income.

The stock market is a complex place and like all things in life there are more then one way to do things. I was watching an advertisement on Penny Stock millionaires and my friend replied that she never got the price she wanted for stocks, so she always overpaid. Plus as soon as she bought, the market would of course take a dip adding insult to injury! I saw an opportunity to tell her about options and using cash covered Puts to buy stock at the price you want or not at all.

Cash backed Puts.
Puts you sell give someone the right, but not the obligation to sell you a certain stock at a certain price. As insurance against falling prices, Puts become more valuable when prices are falling. Most think of them as terrible yokes around their necks. I prefer to think differently. Everything is point of view. You can look at Puts as obligating you to buy a certain stock at a certain price or you can see it as an opportunity. I see an opportunity.

I call Puts my Magic Wand. Let me explain.

Netflix has been a hit stock for a while, many have wanted to add it to their portfolio. But at the “right price” which every investor defines for themselves.
I wanted it at 235, but it was 245-256 range.

I decided to sell a contract of Puts with the strike price of 235. I sold someone the right to sell me Netflix at 235, the price I wanted to buy it. One contract for 7$ per share or $700. I accepted the contract gladly. Then Disney and Apple came out with competition in the streaming movie business. Low and behold, Netflix’s price dropped and someone sold me 100 shares for 235$. Like magic 100 shares of Netflix showed up in my account!

But the best part was that I was able to reduce my basis with the 7$ credit I received! So actually I bought it for 235-7 or 228$. Incredible. After a few weeks the fear wore off and Netflix went back up to 239. I am up 10$ or 1000$!

Its like Magic. I am not very good at slight of hand Magic tricks, but I know how to use Puts.

Merry Christmas!

✍️ written by Shortsegments

Read other articles by me on the Steemit Social Media Platform, where writers get paid for their content by the community by upvotes worth the cryptocurrency, called Steem.

Please follow my Steemleo investment Blog

Please follow my Twitter Feed Here

😅😊

Posted via Steemleo | A Decentralized Community for Investors

I used to sell puts a lot, it was nice when they expired and I would make 100%! Once I sold a whole bunch of SVNT Pharmaceutical puts, tons for a long time. I sold too many, way too many. It was before 2008 and the market was starting to go down. Luckily SVNT had some news and the stock spiked and I bought them all back to cover for pennies that day! After that the stock tanked to basically Zero! If I hadn't covered them there at that exact time, I would have had no way for me to recover. I created a very toxic position. After that I stopped. I saw how close I came to disaster. The moral is be careful selling puts, especially at the top of the market! like now. Maybe it's not the top yet but i might start buying puts if the market starts to have a reaction and finally have a dip! Puts can go up really fast when volatility hits. You can buy calls and puts at same time and just ditch the looser! Straddles rule, way safer!!

Sort Order:

Trending

[-]