Options Insights VI: The Advantages of Cash-Secured Puts
In the article Options Insights III: What is Cash-Secured Puts (TSLA, QQQ, PDD) , I introduced the concept of Sell Cash-Secured Puts.
And in Options Insights IV: The Downside of Cash-Secured Puts, I discussed the downsides of Sell Put.
I gonna talk about the advantages of Sell Cash-Secured Put.
1. High win rate
Even in a bear market, if you sell otm put on a cash-secured basis, the win rate is 70%+, or even 85%+. (OTM, Out of the money, means an option has no intrinsic value, only time value)
2. Fault tolerance
Sell put provides a certain safety margin, and can can help you survive and profit in the bear market
When the underlying stock moves sideways or falls slower than the degree of a safety cushion, you can still profit.
3. Time is your friend
Sell put earn money of time value (theta), not delta.(Note: delta, theta: variants in options )
4. More choices
Sell put only needs the underlying stock not to plummet. It's okay when the stock is slightly down or move sideways.
So it's a weak bullish strategy.
You can find way more targets that you believe it will rise 1/2% than that of rising 5/10%.
5. Less affected by the daily fluctuations
For example, if you are bullish on $Alibaba(BABA)$ , $Tesla Motors(TSLA)$ , and $MEITUAN-W(03690)$, you can choose a price that you can accept to buy the shares.
After you have these plans, you can sell put on a weekly / monthly cycle. You won't be affected by the normal daily fluctuations. (But you need to arrange the cash-secured funds).
To learn more about my series for beginners- Options Insights, you can click:
Options Insights III: What is Cash-Secured Puts (TSLA, QQQ, PDD)
Options Insights IV: The Downside of Cash-Secured Puts
Options Insights: Criteria For Selecting Long-Term Target & Recommendations
Options Insights II : Why choose QQQ over SPY?
Options Insights: A Good Time to Sell Put of TSLA & TENCENT Now
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