you don't [agree]. So that's all that's important in this instance.
Ian,
I highly value your opinion. That is why when you said "Do it", I did! ;-) Naturally, I'm being somewhat facetious because you counseled against it, but I firmly believe there is no better teacher than actual experience, which explains why I frequently seek out new investment vehicles and tactics. It also explains why I seek to learn from the experience and wisdom of others.
One sometimes needs to pay tuition in order to benefit from the learning curve. I often like to first solicit the opinions of others whose views I respect. I do not necessarily follow their guidance. Indeed frequently there is disagreement. What I value most highly is one who is highly opinionated, articulate in explaining the basis for their opinion, and energetic in defending it.
I have rather limited experience shorting naked LEAP puts, although I have had some success with a similar approach over the years in 3 to 6 month options. Besides the AMAT puts I sold yesterday I am also currently short Intel Jan '03 40 puts.
My strategy is very simple in its current form, although I may refine it later. I look for situations where the worst case scenario is that I wind up with stock at what I consider to be an attractive price [strike price minus premium received]. I know that my upside potential is strictly limited to the premium that I will receive so this strategy may not be ideal for situations where I perceive the stock has huge upside potential and minimal downside risk. However, I generally believe the market is too efficient to present many such opportunities and for this reason I think that as a conservative strategy, with very limited maintenance needs (i.e., little or no monitoring or transaction costs, unlike your 'sell frequent 2 month puts' suggestion) and a high comfort factor (i.e., if the stock tanks, I get to buy it cheap; if the stock does not move much in either direction, I am better off for having sold the put; and if the stock moves up sharply, well, at least I have earned my 20% in two years, which I do not consider to be such a bad return in this environment.) I'm not sure how else to determine what would be an adequate premium.
Thanks for giving me a chance to hash this out in my mind. I really appreciate the give and take. As always, if there is something I have overlooked, I hope you will let me know.
Cheers,
Sam |
