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Strategies & Market Trends : Selling Puts: Have Cash Will Travel
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To: David Lind who wrote (835)1/21/2000 12:56:00 PM
From: OX  Read Replies (1) of 1235
 
David, great topic.

dave_s asked about recovery strategies earlier and we got hardly any response... I know everyone's interested in it. so let's everyone throw out theirs... there are lots of ways to do this, and I would like to learn some new ones... just in case ;-)

ok, I've mentioned my main strategy is to roll out (or down or out AND down). btw, I've rarely had to do this thanks to the perpetual bull machine.

David... you won't get assigned unless you are negative time value. being ITM won't do this to you. it has to be DITM. but the likelihood of DITM assignment is higher w/ Puts than Calls due to the way they're priced.

It's also a good idea to ask your broker for their assignment procedures. most are random, but it's a good idea to get the details anyway.

I usually don't like to write puts on anything less than .33 delta (i know put deltas are negative.. you get the idea).
i also usually play month-to-month... this is just my style.
I then base my strike written on the underlying supports and where I would mind buying the underlying... or where I would naturally buy it anyway (unless something fundamental seriously changes :-)

Other things to balance are how much prem you're receiving to make it worth your while... I've posted this before to as roughly 1pt/wk to expiration. which is why I don't play low priced stocks.
if you don't get enough prem to 'make it worth your while', then if you need to repair, you're going to be facing a much bigger problem.
needless to say, the sooner you get to your strike, the worse your problem becomes.

nothing is more important than the underlying.

>>>I am planning to put a large part of my margin into writing puts for developing income

JMHO... if you're just starting to do this, I would start out small until you get the 'feel' for it. paper trades, small positions then graduate to larger.
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