Longterm Investing
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Original post: My fifth month to sell puts on ATPG
For Atpg 2010 Oct $12 put, I sold today at 1.05 premium. So my break point is 10.95. Come Oct 16, if atpg is under 12, then I will have to find money to buy shares at 12, otherwise, I pocket the premium without the need to do anything.
It is a simple strategy, but selling naked puts is considered the riskiest strategy, riskier than naked calls, since stocks usually drop much faster than climbs.
For me, I am just trying to generate some cash flow using my extra buying power （not cash). For one thing, I do not mind to buy ATPG at $11, I think that is the base if you want to sell puts, but if you are bullish on sth, you better just buy the shares. I have shares, calls and leaps on atpg too. If I have to buy ATPG on margin, I am willing to pay the interest and wait for some near term catalysts to come around and free me. A lot of people equals margin to absolute evil, but I think there is not much difference from using a loan to buy home or do business. Keys are: you know what you are doing, and you make sure you can handle the amount of loans.
Finally, you should try to sell puts in a bear market or early period of bull market, it sounds contradictory to common sense, but that is the case for me. You want to sell puts on very volatile stocks, that way, the premium is good. Selling puts during crisis is the most profitable, like the puts I sold on apc when apc is around 35 on its second leg down.
Avoid good value company with bk potential.
For Atpg 2010 Oct $12 put, I sold today at 1.05 premium. So my break point is 10.95. Come Oct 16, if atpg is under 12, then I will have to find money to buy shares at 12, otherwise, I pocket the premium without the need to do anything.
It is a simple strategy, but selling naked puts is considered the riskiest strategy, riskier than naked calls, since stocks usually drop much faster than climbs.
For me, I am just trying to generate some cash flow using my extra buying power （not cash). For one thing, I do not mind to buy ATPG at $11, I think that is the base if you want to sell puts, but if you are bullish on sth, you better just buy the shares. I have shares, calls and leaps on atpg too. If I have to buy ATPG on margin, I am willing to pay the interest and wait for some near term catalysts to come around and free me. A lot of people equals margin to absolute evil, but I think there is not much difference from using a loan to buy home or do business. Keys are: you know what you are doing, and you make sure you can handle the amount of loans.
Finally, you should try to sell puts in a bear market or early period of bull market, it sounds contradictory to common sense, but that is the case for me. You want to sell puts on very volatile stocks, that way, the premium is good. Selling puts during crisis is the most profitable, like the puts I sold on apc when apc is around 35 on its second leg down.
Avoid good value company with bk potential.
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