Hi all
I trade WEEKLY OPTIONS -- usually by SELLING CALLS but in the current market I've been looking at SELLING PUTS.
I've found that because most people play a 100% LOSING STATEGY - Chasing Losses or holding a losing position in the hope that the Market will turn and help them recover their losses - selling PUTS OPTIONS can often be a good strategy..
Look at trading OPTIONS --especially the WEEKLY ones which expire EVERY FRIDAY.
So SELL a PUT OPTION on a share you don't mind owning if you have to buy it.
Selling a PUT option means that you only have to purchase the stock if it FALLS to the strike price --and then only if a BUYER of an OPTION exercises the right to "PUT" their shares to you AT THE STRIKE PRICE.
By SELLING an option you agree to purchase shares at the strike (if selling a PUT) or agree to sell your shares at the strike price if selling a CALL. For these you get paid a premium which you keep whatever happens to the price of the stock.
This is where Market Psychology can work in your favour : -
Now you often won't get PUT when an option reaches the PUT STRIKE price -- most people don't want to SELL their stock at a large loss so often in my experience the price of the stock has to go WELL UNDER the strike price before it is "PUT" to you.
For Weeklys this is great since by the time people have made up their mind to SELL the stock so you could get "PUT" the option will have expired.
So for relatively stable stocks that are only falling slowly in this market downturn SELLING a PUT option makes a lot of sense -- choose a stock that you would not mind owning -- and work out what you would be prepared to pay for it.
Then SELL a PUT option at the strike price you would buy the stock. Say you would be prepared to buy at 22 USD -- and the PUT option pays you a 41 Cent premium. Then if the shares are PUT to you you've effectively got the shares at 21.59 - which is CHEAPER than you would have bought them for in the first place.
Now the chances are you won't get PUT if the shares even go as low as 21.50 -- but you get the premium whatever happens.
Now if the shares start rising -- sell a CALL OPTION -- so you make money either way.
This is where Market Psychology works in your favour.
Cheers
jimbo
I trade WEEKLY OPTIONS -- usually by SELLING CALLS but in the current market I've been looking at SELLING PUTS.
I've found that because most people play a 100% LOSING STATEGY - Chasing Losses or holding a losing position in the hope that the Market will turn and help them recover their losses - selling PUTS OPTIONS can often be a good strategy..
Look at trading OPTIONS --especially the WEEKLY ones which expire EVERY FRIDAY.
So SELL a PUT OPTION on a share you don't mind owning if you have to buy it.
Selling a PUT option means that you only have to purchase the stock if it FALLS to the strike price --and then only if a BUYER of an OPTION exercises the right to "PUT" their shares to you AT THE STRIKE PRICE.
By SELLING an option you agree to purchase shares at the strike (if selling a PUT) or agree to sell your shares at the strike price if selling a CALL. For these you get paid a premium which you keep whatever happens to the price of the stock.
This is where Market Psychology can work in your favour : -
Now you often won't get PUT when an option reaches the PUT STRIKE price -- most people don't want to SELL their stock at a large loss so often in my experience the price of the stock has to go WELL UNDER the strike price before it is "PUT" to you.
For Weeklys this is great since by the time people have made up their mind to SELL the stock so you could get "PUT" the option will have expired.
So for relatively stable stocks that are only falling slowly in this market downturn SELLING a PUT option makes a lot of sense -- choose a stock that you would not mind owning -- and work out what you would be prepared to pay for it.
Then SELL a PUT option at the strike price you would buy the stock. Say you would be prepared to buy at 22 USD -- and the PUT option pays you a 41 Cent premium. Then if the shares are PUT to you you've effectively got the shares at 21.59 - which is CHEAPER than you would have bought them for in the first place.
Now the chances are you won't get PUT if the shares even go as low as 21.50 -- but you get the premium whatever happens.
Now if the shares start rising -- sell a CALL OPTION -- so you make money either way.
This is where Market Psychology works in your favour.
Cheers
jimbo
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