Very good advice. I am trying

2022-07-11

Very good advice. I am trying my hand at selling put options too. My approach:

1) look at companies you believe in. A put, after all, means that you believe that the share price not drop below a certain amount.

2) look at companies YOU CAN AFFORD. This is not a game: while we can always buy back the option (to cut losses, ostensibly) closer to expiry, you must always assume a worst-case scenario, which is that you must buy a lot of 100 shares if the said stock. So make sure you can afford it to avoid unnecessary trouble.

3) same as (2), but look at companies you believe it. After all, owning 100 shares of a company you believe in will always be a good thing. Just make sure you don't overextend your finances while doing so!

Would love to hear your perspectives too. 😃

Does Selling Put Options During a Market Downturn Provide a Safety Net?

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Comments

hikaridenka
2022-07-11
hikaridenka
Thanks for the sharing too
yeetmin76
2022-07-11
yeetmin76
Thanks for sharing
lappiloco
2022-07-11
lappiloco
tesla and amd =)
cub1
2022-07-11
cub1
you're right.
QSL
2022-07-11
QSL
k
gg123gg
2022-07-11
gg123gg
ok

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This is not a game: while we can always buy back the option (to cut losses, ostensibly) closer to expiry, you must always assume a worst-case scenario, which is that you must buy a lot of 100 shares if the said stock. So make sure you can afford it to avoid unnecessary trouble.&nbsp; 3) same as (2), but look at companies you believe it. After all, owning 100 shares of a company you believe in will always be a good thing. Just make sure you don't overextend your finances while doing so! Would love to hear your perspectives too. 😃</body></html>","htmlText":"<html><head></head><body>Very good advice. I am trying my hand at selling put options too. My approach: 1) look at companies you believe in. A put, after all, means that you believe that the share price not drop below a certain amount.&nbsp; 2) look at companies YOU CAN AFFORD. This is not a game: while we can always buy back the option (to cut losses, ostensibly) closer to expiry, you must always assume a worst-case scenario, which is that you must buy a lot of 100 shares if the said stock. So make sure you can afford it to avoid unnecessary trouble.&nbsp; 3) same as (2), but look at companies you believe it. After all, owning 100 shares of a company you believe in will always be a good thing. Just make sure you don't overextend your finances while doing so! Would love to hear your perspectives too. 😃</body></html>","text":"Very good advice. I am trying my hand at selling put options too. My approach: 1) look at companies you believe in. A put, after all, means that you believe that the share price not drop below a certain amount. 2) look at companies YOU CAN AFFORD. This is not a game: while we can always buy back the option (to cut losses, ostensibly) closer to expiry, you must always assume a worst-case scenario, which is that you must buy a lot of 100 shares if the said stock. So make sure you can afford it to avoid unnecessary trouble. 3) same as (2), but look at companies you believe it. After all, owning 100 shares of a company you believe in will always be a good thing. Just make sure you don't overextend your finances while doing so! Would love to hear your perspectives too. 😃","highlighted":2,"essential":1,"paper":1,"likeSize":30,"commentSize":0,"repostSize":0,"favoriteSize":0,"link":"https://ttm.financial/post/9071862909","repostId":1147195336,"repostType":2,"repost":{"id":"1147195336","pubTimestamp":1657505714,"share":"https://www.laohu8.com/m/news/1147195336?lang=&edition=full","pubTime":"2022-07-11 10:15","market":"other","language":"en","title":"Does Selling Put Options During a Market Downturn Provide a Safety Net?","url":"https://stock-news.laohu8.com/highlight/detail?id=1147195336","media":"KITCO","summary":"In a significant market downturn, bearish sentiment, if not outright fear, can drive down the share ","content":"<html><head></head><body>In a significant market downturn, bearish sentiment, if not outright fear, can drive down the share price of good companies rather drastically. When the market is in a sustained selling mood, there can be a substantial disconnect between the long-term fundamentals and the technical price action we see on the chart.The Temptation to Bottom FishWhat can we do when good companies are trading at what appear to be bargain prices? We could &#34;stick our toe in the water&#34; and buy shares. But what if we&#39;re wrong about whether a bottom in the share price is in place? Or what if the stock takes a very long time to build a base and goes nowhere for an extended period?Selling PutsRather than buying shares, we could sell put options instead. It&#39;s a strategy famously used by Warren Buffett to acquire shares at a discount.First, a quick review ofput options. Someone who owns or is &#34;long&#34; a put has paid a premium to have the right, but not the obligation, to sell shares to the counterparty at the strike price. But that right exists only until the option expires.The counterparty who has sold, or is &#34;short&#34; a put, has an obligation to buy shares at the strike price. That obligation is eliminated when the option expires, and the put seller gets to keep the premium collected whether they have shares &#34;put to them&#34; or not.Although selling puts can be a way to acquire shares at a discount, traders (as opposed to investors) may just be interested in collecting the put premium as an income strategy.Rules to RememberWe must like the stock at or around the strike price and believe it will recover over time. Even if we&#39;re just selling puts to collect premiums, keep in mind that we could end up owning shares.Of course, there must be options available on the stock. The options should have good liquidity – decent volume, open interest, and bid/ask spreads that aren&#39;t too wide. The strike prices near the current share price should have hundreds, if not thousands, of open interest contracts. The bid/ask spreads on the options should be just a few pennies wide. It&#39;s usually a good sign of option liquidity if weekly, not just monthly, options are available.What Makes a Good Candidate?Look for companies with a long history of good earnings that have rebounded after many economic cycles. The company sells a product or service that will likely remain in demand for the foreseeable future. (No &#34;buggy whip&#34; manufacturers.) A good candidate will likely weather the current storm and come out okay when the economy recovers.Ideally, the share price is under $25, preferably under $20. At that price level and below, the option premiums relative to the share price make for efficient use of capital and an attractive return on risk.Example SetupSay company &#34;ABC&#34; was trading for $34 a share before the general market selloff but now is trading for roughly half that at $15.60. There is &#34;blood in the streets,&#34; but overall sentiment may be improving.The price action on the chart shows some tentative signs of bottoming. A gap up with increased volume is a good sign. A recent earnings report that wasn&#39;t as &#34;bad&#34; as expected is another good sign.In this example, the premium for the $15 put is $1.20 for an expiration 42 days away. While the $15 strike is currently out-of-the-money (OTM), if we had shares put to us at $15, our cost basis would be $15 - $1.20, or $13.80.If the shares were trading at $14 at expiration, we&#39;d have shares put to us. But we would still be ahead on the trade with a profit. We could turn around and sell those shares at $14 and have a profit of $0.20.As options sellers, we&#39;re selling time value that decays as the expiration date approaches. We know that regardless of what happens with the share price, the time value we sold will be $0 at expiration.As an alternative to risking assignment, we could roll the trade forward rather than wait for shares to be put for us. We could buy back the option on or near the expiration date and sell another option further out in time. We can typically do that for a net credit. In this example, we might be able to collect another $1 in premium. So now our risk in the trade is reduced to $15 - $1.20 - $1.00 = $12.80.SummaryPut selling can be a savvy way to go &#34;bottom-fishing&#34; for good stocks, either to acquire shares at a discount or just collect option premiums. Selling puts gives us a way to get &#34;paid&#34; while we wait for the share price to recover. We can make a profit if the share price goes up, sideways, or even down a bit.Enjoy your day!</body></html>","source":"lsy1657505665102","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Does Selling Put Options During a Market Downturn Provide a Safety Net?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nDoes Selling Put Options During a Market Downturn Provide a Safety Net?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-07-11 10:15 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.kitco.com/commentaries/2022-07-08/Does-selling-put-options-during-a-market-downturn-provide-a-safety-net.html>KITCO</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nIn a significant market downturn, bearish sentiment, if not outright fear, can drive down the share price of good companies rather drastically. When the market is in a sustained selling mood, there ...\n\n<a href=\"https://www.kitco.com/commentaries/2022-07-08/Does-selling-put-options-during-a-market-downturn-provide-a-safety-net.html\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".IXIC":"NASDAQ Composite",".DJI":"道琼斯",".SPX":"S&P 500 Index"},"source_url":"https://www.kitco.com/commentaries/2022-07-08/Does-selling-put-options-during-a-market-downturn-provide-a-safety-net.html","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1147195336","content_text":"In a significant market downturn, bearish sentiment, if not outright fear, can drive down the share price of good companies rather drastically. When the market is in a sustained selling mood, there can be a substantial disconnect between the long-term fundamentals and the technical price action we see on the chart.The Temptation to Bottom FishWhat can we do when good companies are trading at what appear to be bargain prices? We could \"stick our toe in the water\" and buy shares. But what if we're wrong about whether a bottom in the share price is in place? Or what if the stock takes a very long time to build a base and goes nowhere for an extended period?Selling PutsRather than buying shares, we could sell put options instead. It's a strategy famously used by Warren Buffett to acquire shares at a discount.First, a quick review ofput options. Someone who owns or is \"long\" a put has paid a premium to have the right, but not the obligation, to sell shares to the counterparty at the strike price. But that right exists only until the option expires.The counterparty who has sold, or is \"short\" a put, has an obligation to buy shares at the strike price. That obligation is eliminated when the option expires, and the put seller gets to keep the premium collected whether they have shares \"put to them\" or not.Although selling puts can be a way to acquire shares at a discount, traders (as opposed to investors) may just be interested in collecting the put premium as an income strategy.Rules to RememberWe must like the stock at or around the strike price and believe it will recover over time. Even if we're just selling puts to collect premiums, keep in mind that we could end up owning shares.Of course, there must be options available on the stock. The options should have good liquidity – decent volume, open interest, and bid/ask spreads that aren't too wide. The strike prices near the current share price should have hundreds, if not thousands, of open interest contracts. The bid/ask spreads on the options should be just a few pennies wide. It's usually a good sign of option liquidity if weekly, not just monthly, options are available.What Makes a Good Candidate?Look for companies with a long history of good earnings that have rebounded after many economic cycles. The company sells a product or service that will likely remain in demand for the foreseeable future. (No \"buggy whip\" manufacturers.) A good candidate will likely weather the current storm and come out okay when the economy recovers.Ideally, the share price is under $25, preferably under $20. At that price level and below, the option premiums relative to the share price make for efficient use of capital and an attractive return on risk.Example SetupSay company \"ABC\" was trading for $34 a share before the general market selloff but now is trading for roughly half that at $15.60. There is \"blood in the streets,\" but overall sentiment may be improving.The price action on the chart shows some tentative signs of bottoming. A gap up with increased volume is a good sign. A recent earnings report that wasn't as \"bad\" as expected is another good sign.In this example, the premium for the $15 put is $1.20 for an expiration 42 days away. While the $15 strike is currently out-of-the-money (OTM), if we had shares put to us at $15, our cost basis would be $15 - $1.20, or $13.80.If the shares were trading at $14 at expiration, we'd have shares put to us. But we would still be ahead on the trade with a profit. We could turn around and sell those shares at $14 and have a profit of $0.20.As options sellers, we're selling time value that decays as the expiration date approaches. We know that regardless of what happens with the share price, the time value we sold will be $0 at expiration.As an alternative to risking assignment, we could roll the trade forward rather than wait for shares to be put for us. We could buy back the option on or near the expiration date and sell another option further out in time. We can typically do that for a net credit. In this example, we might be able to collect another $1 in premium. So now our risk in the trade is reduced to $15 - $1.20 - $1.00 = $12.80.SummaryPut selling can be a savvy way to go \"bottom-fishing\" for good stocks, either to acquire shares at a discount or just collect option premiums. Selling puts gives us a way to get \"paid\" while we wait for the share price to recover. We can make a profit if the share price goes up, sideways, or even down a bit.Enjoy your day!","news_type":1},"isVote":1,"tweetType":1,"viewCount":575,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[".IXIC"],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":631,"xxTargetLangEnum":"ORIG"},"commentList":[{"id":102808372,"commentId":"102808372","gmtCreate":1657510434512,"gmtModify":1663253980033,"authorId":4098693461544720,"author":{"id":4098693461544720,"idStr":"4098693461544720","authorId":4098693461544720,"name":"hikaridenka","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9071862909,"objectIdStr":"9071862909","type":1,"supId":0,"supIdStr":"0","prevId":0,"prevIdStr":"0","content":"Thanks for the sharing too","text":"Thanks for the sharing too","html":"Thanks for the sharing too","likeSize":1,"commentSize":0,"subComments":[],"verified":10,"allocateAmount":0,"commentType":"valid","coins":0,"score":0},{"id":102808043,"commentId":"102808043","gmtCreate":1657509895240,"gmtModify":1663253981038,"authorId":4103323948802810,"author":{"id":4103323948802810,"idStr":"4103323948802810","authorId":4103323948802810,"name":"yeetmin76","avatar":"https://community-static.tradeup.com/news/544041e887c7ec6d817650beb655603d","vip":1,"currentWearingBadge":{"badgeId":"1026c425416b44e0aac28c11a0848493-2","templateUuid":"1026c425416b44e0aac28c11a0848493","name":"Senior Tiger","description":"Join the tiger community for 1000 days","bigImgUrl":"https://static.tigerbbs.com/0063fb68ea29c9ae6858c58630e182d5","smallImgUrl":"https://static.tigerbbs.com/96c699a93be4214d4b49aea6a5a5d1a4","grayImgUrl":"https://static.tigerbbs.com/35b0e542a9ff77046ed69ef602bc105d","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2024.09.19","individualDisplayEnabled":0,"individualDisplaySort":0,"categoryType":1001},"crmLevel":4,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9071862909,"objectIdStr":"9071862909","type":1,"supId":0,"supIdStr":"0","prevId":0,"prevIdStr":"0","content":"Thanks for sharing","text":"Thanks for sharing","html":"Thanks for sharing","likeSize":1,"commentSize":0,"subComments":[],"verified":10,"allocateAmount":0,"commentType":"valid","coins":0,"score":0},{"id":102808013,"commentId":"102808013","gmtCreate":1657509822731,"gmtModify":1663253982250,"authorId":4102578986641510,"author":{"id":4102578986641510,"idStr":"4102578986641510","authorId":4102578986641510,"name":"lappiloco","avatar":"https://community-static.tradeup.com/news/d533ea278e6d41d71194d1f54aeee83e","vip":1,"currentWearingBadge":{"badgeId":"a83d7582f45846ffbccbce770ce65d84-1","templateUuid":"a83d7582f45846ffbccbce770ce65d84","name":"Real Trader","description":"Completed a transaction","bigImgUrl":"https://static.tigerbbs.com/2e08a1cc2087a1de93402c2c290fa65b","smallImgUrl":"https://static.tigerbbs.com/4504a6397ce1137932d56e5f4ce27166","grayImgUrl":"https://static.tigerbbs.com/4b22c79415b4cd6e3d8ebc4a0fa32604","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2021.12.29","individualDisplayEnabled":0,"individualDisplaySort":0,"categoryType":1100},"hat":"https://static.tigerbbs.com/b0a2963eb37c60c5d6d4a8dbcd266952","crmLevel":3,"crmLevelSwitch":1,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9071862909,"objectIdStr":"9071862909","type":1,"supId":0,"supIdStr":"0","prevId":0,"prevIdStr":"0","content":"tesla and amd =)","text":"tesla and amd =)","html":"tesla and amd =)","likeSize":1,"commentSize":0,"subComments":[],"verified":10,"allocateAmount":0,"commentType":"valid","coins":0,"score":0},{"id":102812696,"commentId":"102812696","gmtCreate":1657525907814,"gmtModify":1663254003126,"authorId":4119340995886272,"author":{"id":4119340995886272,"idStr":"4119340995886272","authorId":4119340995886272,"name":"cub1","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9071862909,"objectIdStr":"9071862909","type":1,"supId":0,"supIdStr":"0","prevId":0,"prevIdStr":"0","content":"you're right.","text":"you're right.","html":"you're right.","likeSize":1,"commentSize":0,"subComments":[],"verified":10,"allocateAmount":0,"commentType":"invalid","coins":0,"score":0},{"id":102808282,"commentId":"102808282","gmtCreate":1657510270522,"gmtModify":1663253982943,"authorId":3586036183115498,"author":{"id":3586036183115498,"idStr":"3586036183115498","authorId":3586036183115498,"name":"QSL","avatar":"https://static.tigerbbs.com/bb5d27e2d0cb86c5c558fecd085ec01e","vip":1,"crmLevel":2,"crmLevelSwitch":1,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9071862909,"objectIdStr":"9071862909","type":1,"supId":0,"supIdStr":"0","prevId":0,"prevIdStr":"0","content":"k","text":"k","html":"k","likeSize":0,"commentSize":0,"subComments":[],"verified":10,"allocateAmount":0,"commentType":"invalid","coins":0,"score":0},{"id":102807968,"commentId":"102807968","gmtCreate":1657509750679,"gmtModify":1663253982436,"authorId":4088378716140630,"author":{"id":4088378716140630,"idStr":"4088378716140630","authorId":4088378716140630,"name":"gg123gg","avatar":"https://community-static.tradeup.com/news/5a0f75a6bc386ca911f80340ed0a49f1","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":9071862909,"objectIdStr":"9071862909","type":1,"supId":0,"supIdStr":"0","prevId":0,"prevIdStr":"0","content":"ok","text":"ok","html":"ok","likeSize":0,"commentSize":0,"subComments":[],"verified":10,"allocateAmount":0,"commentType":"invalid","coins":0,"score":0}],"isCommentEnd":false,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/9071862909"}