Jill,
Have you...RR...or anybody else looked into selling puts on JDSU ?
I was thinking like this.....so many folks are sure it will pop by end of year, couldnt you write maybe the Jan 70's or 80's and take the premium and more then likely not have the stock PUT to you in january if it is higher. Or, if it does drop,....say you sold jan 70 puts...you not only collected the premium upfront, but you also picked up some cheap shares of jdsu at $70.
I have never sold puts.....just buy calls, leaps and write covered calls, so let me make sure I understnad this.
In this instance....say I sell 1 PUT for Jan JDSU 80. I would collect the premium ( currently 8 5/8) and I would have $8000.00 put on margin/collateral, within my account. In other words, the strike price would have to be covered by me....I would have to have the cash or margin to have the stock PUT to me at the strike price......correct ?? Then, come january, If JDSU is up, nothing happens, she expires worthless, the cash/margin available is reflected in my account upon expiration. If JDSU drops to 80 or below, and I am PUT, then I simply have bought JDSU at $80, regardless of where it is as long as it is below 80. I do still keep the original 8 5/8 premium.
Anybody care to expand on this....Am I on target with this selling of puts. I find myself sometimes wanting to put in low ball offers.......why not get paid via a premium and then put in the low ball offer. Or, with a stock like JDSU, in which you could sell a Jan or March Put at a low ball strike price, you can collect income simply for being willing to buy a stock dirt cheap down the road that you wouldnt mind owning at that price anyway.
The only downside I see is if the stock quickly were to erode past your strike. If I sell Jan JDSU 80 puts and in Januaray jdsu is at $50, I am screwed....but then again, I do get to hold the stock, and if it goes back up, I come out allright. So, it seems to me that selling puts on stocks you wouldnt mind owning cheaply is a great way to earn immediate income and maybe pick up some bargains along the way.
PLEASE...anybody respond as you wish. Still trying to learn myself. Buying stock and covering is also a great investement strategy which I utilize, but selling puts seems like it has it's rewards as well. No money down, just credit in your account to cover the put strike price...and immediate income.
Opinions....comments
keith@thismarketstillstinks!!!!!!.com |
