Brian, concerning the risk of put writing, with the right selection of the underlying and the strike, one can make a very nice income from writing puts that are as much as 25-30% OTM. Yes, they are out there on good stocks. It just takes a little searching. Also, because it is a wasting asset, if the underlying does make a radical move, you can often buy it back at only a small loss and roll it out. Often the new premium, given recent volatility, is even greater than the original write. The only way you can really get hurt is if the stock trashes totally just after the position is opened. But with a little time spent on TA and FA before trading, staying nicely OTM, and remaining diversified in the total account, the risk of a killer event is extremely small. Certainly IMO, much smaller than being long the underlying where you must jump ship or hold 6 months for a recovery.
-David |
