You guys are entering the trade for the wrong reasons then. @boilermaker75 not surprisingly has it down 100% right.
I don’t really give a shit whether i own the stock or not, I’m really just selling insurance to folks on stuff that I can deal with owning at that price/valuation. If MO at 41.30 cost does me in, so be it. But I’d wager(as I am) that I either make money on the put sale or can make money from that basis. I don’t care if it gets bought for $50000 a share tomorrow. If it goes to $25 I should’ve been more selective obviously in hindsite, but that’s always a risk in the market anyway.
People love to complicate the heck out of things which is what I think is going on here. Every stock can go up or down a lot. That’s not a risk specific to selling puts.
I do this consistently and look at it exactly the same way as you and @boilermaker75 ... selling insurance. I'll usually do it with a company that I either already own and am looking to add to, or one that I'm looking to start a new position in but maybe some unrelated news, market sentiment or whatever has been lifting the general market up as a whole. Rather than wait on the sidelines for a pull back that may or may not come anytime soon, I sell insurance on the company and collect the premiums, which alone can actually create a pretty good return.
One thing I'll add is that if there is a modest decline, rather than be put the shares, I'll usually just roll the put out and collect the premium again. Now if there's a large decline where there's not enough premium to make it worth doing again, I'll let it be exercised and most likely be buying even more shares in addition as that's really the ideal opportunity I was waiting for to begin with
What are you buying today?
in General Discussion
Posted
I do this consistently and look at it exactly the same way as you and @boilermaker75 ... selling insurance. I'll usually do it with a company that I either already own and am looking to add to, or one that I'm looking to start a new position in but maybe some unrelated news, market sentiment or whatever has been lifting the general market up as a whole. Rather than wait on the sidelines for a pull back that may or may not come anytime soon, I sell insurance on the company and collect the premiums, which alone can actually create a pretty good return.
One thing I'll add is that if there is a modest decline, rather than be put the shares, I'll usually just roll the put out and collect the premium again. Now if there's a large decline where there's not enough premium to make it worth doing again, I'll let it be exercised and most likely be buying even more shares in addition as that's really the ideal opportunity I was waiting for to begin with