Selling Puts: Have Cash Will Travel Message Board

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Strategies & Market Trends : Selling Puts: Have Cash Will Travel

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To: jjs_ynot who wrote (906)	1/23/2000 9:16:00 PM
From: Tom K.	Read Replies (3) of 1235

...Perhaps you could share your favorite repair techniques.... Dave, I deal only in stocks that I like, so when one tanks, I don't mind staying with options on the stock. Having said that, I don't often have to repair, but when I do, I simply buy back the losing PUT and sell another one out farther and at a lower strike if I can. A recent example: I was short DELL PUTs at 45 heading into expiration this week and wasn't sure the stock would close above 45. Although I like the stock, I didn't want to own it (get it PUT to me). I needed to repair. I originally received 1.625 for the PUTs which were now at 2.9375. I bought them back for a loss of 1.3125 (1.625-2.9375). But I like the stock, so I sold May 40 PUTs for 4.25. So now I'm up by 2.9375 (4.25-1.3125) which is better than my original position and I've reduced my strike from 45 down to 40. Now I have more time and a lower risk point. If DELL heads up as I think it will, the PUTs will drop in value and I'll close then early for a profit. If I'm wrong and DELL drops some more, I'll do the repair again and roll down to 35. Eventually, I'll get out of this profitably. Hope this was helpful. Tom

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