Ken, sorry about the delayed response. I was called out of town without access to the net.
The road you about to embark upon can be quite costly in terms of losses. Before employing any option strategies, its best to identify a goal (Rate of Return) on the funds you intend to invest. Additionally, the risk should never be greater than investing in the associated equity. Using life savings is not the best place to invest into a new venture, especially options.
Back to your point. Selling a put should be used if you anticipate purchasing a stock. For instance, if you were to buy 100 sh of CPQ, I would sell near term puts, Feb 55's, (3.125) last sale. One of two things will happen by options expiration day in February.
A. CPQ closes at 55+ and you keep the 3.125 or;
B. CPQ closes under 55 in which you purchase CPQ at 55. You keep the 3.125 resulting in a real cost of 51.75.
As easy as this looks, its not. You must have considerable knowledge of both technical and fundamentals as it pertains to the security and the market in general.
Overall advise, study. Get a feel for the trends and establish a goal. Write me off line if I can be of help.
Good luck,
Mike Gordon |
