I have just found this thread and find it interesting......
You said .....
However, I'd like to make an addition: With buy/writes, you buy common now. With short puts, you buy it later and for less. Given the choice, I still don't understand why anyone would buy/write when they can sell a put instead.
It is tempting to agree with you but there is (at least) one significant difference, there is no mechanism when selling a put to obtain return from an upswing in the underlying stock to the strike price. The previously OTM contract is now exercised thus yielding the maximum possible return of premium + (strike - basis) - commission. This run-up to the strike, if it occurs, contributes significantly to the total return on the position.
-dfl
I agree to an extent.....but how about this......
Find a stock that you would like to own, that is at what you think is near a bottom, sell a put... the cash is deposited to your acct....if you were correct and that was the bottom..you will keep the $ from the put sale....if the stock drops and is put to you, at least you now own it at a slight discount, now IF this is the botom and the stock goes up, your doing just fine, now you can either buy a call to inhance the up move or wait for the up move to peak and now sell a call....problem that I allwas have is that IF I see the peak , why do I want to keep a stock just because I sold a call...and cant unload the junky stock because naked calls are not allowed for most of us....
All this is why opts are a pain for me....
Any ideas ??
Hal |
