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Strategies & Market Trends : Option Strategies
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To: chris714 who wrote (1995)10/17/2018 4:41:36 PM
From: Thehammer   of 2591
 
My number one rule with selling puts is if I'd like to own more of the underlying at the current strike. If the answer comes back as "NO", then I pass.

If it runs up and I am not comfortable with the price, then I move onto something else.

If you roll down a strike, often you will have to push the expiration further out if you want a credit.

Considering that we all have limited capital allocated to this strategy, you also need to evaluate the relative opportunity in something else. I had sold some SJM puts over a year ago. It ram up and I closed the position and sold some different puts. When SJM tanked, I came back into it.
1) Do you like the stock?
2) Is the risk / reward worth it?
2b) Is the return worth it?
3) Is there something else that is a better opportunity?

The other thing that i would mention is that when the put has is trading at pennies, you are often better off just closing the position. I never regretted closing a position for pennies, but I have regretted not closing some that were at pennies and then I paid a lot more.... I usually am out 3 months or more so I may but the put back if the stock runs and then reallocate the capital.

I will give you a couple of ideas on your positions after I look at the option chains.

Ciao
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