6 Options to Play a Market Bounce

Sell a put to garner premium and lock in a purchase price

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Sell a Put on a Stock You Want

Decision Time 185

Decision 185

The market has rallied nearly 25% just since August, lifting up a number of solid stocks. Now, many option trading investors are wondering if stocks are overbought. Oil prices continue to rise and there’s talk the federal government could shut down. Investment gurus have said the market could be in for some consolidation before moving higher.

Selling a put option is one way to play a market consolidation and rally.  Selling a put is a bullish strategy where the trader locks in a purchase price on a stock and collects the option premium. In a nutshell he’s saying, “I’d love to buy XYZ. I just want to pay $5 or $10 less than the current price.” If the stock does fall, the put seller will buy the stock and profit if it returns upward.

Here are six stocks and put selling ideas our option experts have recommended as a strategic way to profit from a market consolidation and rally.

Keep in mind that many brokerage firms have restrictions on the selling of put options. Check with your broker for its policies on your account.

Article printed from InvestorPlace Media, http://investorplace.com/2011/02/6-options-to-play-a-market-bounce/.

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