On the other hand, if you own the stock, and sell an OTM call, you stand to make a little capital gain on your stock if you get called out. So, you can win twice. 1) collect call premium, 2)get called out for a profit.
Naked puts only allow a single payday: Collect premium. You could profit by getting put, and then have the stock go back up above the stike price, I suppose...
You could also buy the stock, write the call, and then have the stock drop so that your "second payday" is actually costing you some or all of your premium. On the other hand, you could write the put and then have the stock drop. Your "second payday", in this case, is the capital loss you have avoided.
Another option is to write the put ITM, collect your "second paycheck" immediately, and let the stock rise above your strike.
Anyway... the whole point was that both strategies work best in bullish markets
Whether you write covered calls or puts, the optimal result is achieved when the stock closes on expiration day near to your strike but without assignment. Thus, whether the strategy is bullish or bearish depends on your strike. I will say, though, that neither is a very effective bearish strategy.
dM |
