I didn't violate the rule, I sell puts when oversold. LoF's post put it well, I think. For instance, I can't tell the exact bottom (can you?) in the last weeks I sold March 160s 165s and 180s on JDSU. I did this at various points. Today I did it at 208. Did I know it would retrace down to 203? How could I? Maybe it will retrace further, maybe not. My basic approach is: JDSU is basing in an oversold situation, and I think it has strong support right around this level and will soon rebound as it has consistently in the past.
If I'm wrong, and I don't want to reposition, I'll get some stock for cheaper than it is today. I'm looking at the longterm situatoin and as ed always taught that is why put selling is such a neat strategy: if you have capacity to be put, you are bullish longterm, you either take in cash premium adn keep it, or you get teh stock for cheaper than it is today.
The situation where a stock tanks forever and turns out to be a piece of crap, is fairly rare if you do your DD. |
