💡New To Options❓Follow Buffett To Sell Put😉

Warren Buffett is known to be 1 of the most successful investors of all ⏰ He began investing in stocks at age 10, & was a millionaire by his early 30s, when he began buying Berkshire Hathaway stock at $7.60 per share😱😱😱 The secret of his success, he says, is following 2 rules: “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”

We all know Buffett as someone who buys & holds undervalued companies or wonderful companies at a fair price. However, a lesser-known tactic that Buffett used to build up his fortune is actually by Selling Naked Put Options😉 We might think that someone like Buffett who seems devoted to blue-chip stocks would steer clear of complicated derivatives, but in fact, throughout his investing career, Buffett has capitalised on the advanced options-trading technique of selling naked put options as a hedging strategy. This strategy involves selling an option where we promise to buy a stock at a specific strike price below its current value sometime in the future.

⭐️ This immediately gives us 🐯🐯🐯 money from the sale of the option. This 💵 is called a premium. If the share price doesn’t fall to the strike price, we keep the money😉🤗🥳

⭐️ If the price does fall below the strike price, we purchase the stock at a price that’s less than what we would have paid at the time we sold the option, as the premium we received from the option sale will reduce the cost price of the stock we purchased.

🏆 This is a good strategy on a stock that we 🐯🐯🐯 wouldn't mind owning in the 1st place.

⭐️ In 1993, Buffett used put options to pocket nearly $7.5 million in income while waiting for the price of $Coca-Cola(KO)$ Bearish shares to drop. The option is considered “naked” because he haven’t secured another option to buy the stock, such as shorting shares of that same stock to offset his purchase cost. KO was trading around $39 per share. Buffett, always the bargain hunter, believed that KO was too pricey & wasn't content to passively wait for the stock to fall to his preferred price. After deciding he would be willing to buy KO at $35 per share, Buffett sold enough put option contracts to control 5 million shares at a $35 strike price. In Buffett's case, he received a $1.50 premium for every put option he wrote with a $35 strike price. At 50,000 put options, this allowed him to collect a cool $7.5 million in the process❣️

💡💡💡My options tip for 🐯🐯🐯 is to Sell Naked Put Options for a stock that we wouldn't mind owning in the 1st place😉 In theory, if we continuously sell put options & the strike price is never reached, we will continuously gain option premiums❣️ But on the other hand, if the strike price is reached, we then buy the stock at a discount, win-win situation🥳🥳🥳

$Microsoft(MSFT)$ $Tesla Motors(TSLA)$ $First Republic Bank(FRC)$ $Western Alliance(WAL)$ 

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