Bob, you're absolutely right. Selling puts on a stock you wish to own is a good way to buy the stock at a lower price if in the end, you wish to own the stock. Sometimes.
But for sake of discussion, if Michael Dell died in a plane crash the day after you sold the puts and the stock plunged to 55, if only for a few days, you'd own the stock at 65, when in fact, you would have had the opportunity to buy the stock at 55.
Don't mean to split hairs here, and you sound like an informed investor. As you know, there are risks with all investment strategies, and depending on your risk preference, one strategy may be more appropriate than another. Know another guy who sold 100 of the AMZN Feb 150 puts. Hell, the stock was pushing 200 and he figured if he had to buy the stock at 160, it was a good deal, based on the premium he received for the put sale. Of course, when AMZN went down to 98, he still owned the stock at 160, less the put premium he received. Hindsight says it would have been better just to wait until the stock tanked and then take a long position. IMO.
Good luck on your investment and thank you for your post.
Mark |
