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Technology Stocks : Dell Technologies Inc.
DELL 133.20+5.7%Nov 26 3:59 PM EST
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To: PMS Witch who wrote (77036)11/8/1998 3:03:00 PM
From: nihil  Read Replies (1) of 176387
 
RE: January 40 puts

You will not have the stock put to you above 40. The premium is yours, but is kept for you by your broker. You will own it absolutely as soon as you buy the puts back or they expire valueless. Thus you could make $6/ea ($7.50 - $1.50), and make 75% of your maximum potential gain by buying back now.
You do not have a counterparty in exchange listed options. The OCC is everyone's counterparty. If anyone is so irrational as to exercise their puts rather than sell them while they still have time value (like on Friday morning of expiration) someone will be randomly assigned to take the windfall profit. It won't be you.
Your strategic choices are simple: (1) hope that Dell does not fall below 40 in the next two months and let them expire taking your profit; (2) close out now and leave $1.50 on the table; (3) roll into something else; (4) buy cheap out of the money January 99 puts to limit your downside in a put bullspread (but you would be happy to buy cheap Dell, so this would be throwing good money away.
Selling way out of the money naked puts is an almost guaranteed way of getting very rich if you have the margin not only to cover them with your broker but to buy the wanted stock at a bargain if it drops and you are assigned. The only danger is that the premiums on in the money puts is often attractive enough to make you gamble on too high a strike price. Personally, I think you are sitting in the catbird seat.
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