Freeus...I don't like to buy options, for the sake of buying options, hoping the price will increase...Time works against you...Some people do o.k. with this speculative strategy, but the facts (based on studies done) 80% lose money on options.
An options strategy, though, that I recently stumbled on sounds pretty interesting...It is called a Bull Put Spread, I believe...It works like this...Find a stock you would like to own at a much lower price than it is currently trading..Make sure it's a strong stock, trading above its 200 DMA (strength is seen with this)...Select a stock that has a bright future, even in this climate we're in...(Gee, sounds alot like DELL)......
Sell a put at a strike price below the 200 DMA, and several months out, and receive a premium for it.....In the event the Market/stock trades below the put you sold (you would probably have to buy the stock at the strike price you sold--it would be '"put" to you - but that's o.k., it's a stock you've already decided in the beginning you wanted to own anyway)...
But to protect yourself in the event of a Market meltdown you would have, at the same time you sold a put, also buy one 5 to 7/12 or 10 points below the one you sold....Then if the Market/stock melted down you could exercise your put, and "put" it to someone else....Your only risk is the spread between put sold and put bought, and some of that is actually reduced by the premium you received on the sell put....
If the Market/stock turn out to do well, your first higher up put, the one you sold, will never be exercised and you keep the premium......If the stock does trade back that far, you've bought a company you wanted to begin with......It's like someone is paying you to buy a stock you would buy anyway....What a deal, huh?
Regards, George |
