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7 Tips for Mastering Put Selling

An attractive strategy for both options and stock traders

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Tip #1 – Choose Stocks You Don’t Mind Owning

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For put sells, pick stocks that you wouldn’t mind owning if you had to buy. Remember that put selling is also for those who want to buy a stock at a discount to the current price.

If you want to buy XYZ at $30 and it’s trading at $32, you could sell a 30 strike put, collect the premium, and wait for the stock to decline. If it doesn’t hit $30 before expiration, you keep the premium and sell another put. If the stock moves to $34, perhaps you could raise your “buy” price by selling a 32.50 put. In any case, you’re being paid to wait for the stock to dip to your entry price. Not a bad deal, huh?

On the other hand, don’t sell a put on a stock that you are wildly bullish on. Since a put sell’s gain is capped at the amount of premium received, you’re better off buying the stock or a call option if you anticipate a strong move up. That way you’ll be able to take advantage of the stock’s full move, rather than just a put staying out of the money.

Learn more about selling puts to buy stocks at a discount.

Article printed from InvestorPlace Media,

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