If you check the charts, Apple (AAPL) has, over the past few months, held at $440. It has dipped below $400, it has traded above $460, but $440 has exerted a gravitational pull on the stock for quite a while. Instead of watching this phenomenon, uncertain where to enter the stock, sell some puts. Don’t buy them, sell them.
Why? When you sell a put you transfer the risk to the buyer – more than 8% of options including puts expire worthless. And if you like the stock at $440 for the long haul, why not sell someone the right to sell you the stock at $440 and collect some cash; you can always roll the put before expiration if you don’t actually want to own the shares.
Right now, if you sell an Apple May Week Four, $440 mini options put (if you don’t know, mini options represent 10 shares, not 100) you can get $5.25 or $52.50 a contract. You can look at this gift from a put buyer a couple of ways. You can tell yourself this lowers your cost basis to $434.75 if the stock declines and you opt to be put the stock. Or you can view this as income-generating tactic – and a long term strategy. That $52.50 is a return of 1.2% in four days. Do it fifty times a year and you have a return of 60%.
What if the stock heads south, below $440. Simple – buy back the put and sell next week’s $440 or sell a June put at a lower strike price. You will still be generating cash and income. If this sounds too esoteric, it is not – I do this all the time in my Options Income Blueprint Service, rolling is a critical part of an options based selling strategy. And it works – I recommended selling a $460 put s weeks ago, the stock blew up, we rolled the put a couple of times and ended up with a tidy profit.
Think about it.
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