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Strategies & Market Trends : Selling Puts: Have Cash Will Travel -- Ignore unavailable to you. Want to Upgrade?

To: OX who wrote (904)	1/23/2000 9:00:00 PM
From: David Lind	Read Replies (1) \| Respond to of 1235

OX, I agree completely with this, in that those who are dissing put sales are missing what I feel are a few important points. 1. The short put position can be closed at any time prior to expiry. Profits can be taken as income or rolled into another position. Same as any other investment. No difference. And only a fool would open any position and ignore it until the date of expiry. 2. I have yet to find an investment scenario which can help many investors like me generate an independent income as simply as writing puts. By that, I refer to a portfolio size that is large enough to handle the margin requirements with pad, but not yet large enough to generate a six figure income invested at 10-15%. While one is not likely to get rich quickly from selling puts, it is an excellent income vehicle if handled conservatively. 3. I fail to see how someone can equate the advantages of being long stock in a falling market, with being short puts. Understanding that neither scenario is rosy, if I have a number of relatively small diversified positions, with each strike a good 10-20 percent below the current stock price, and if I have entered the trade at the low point of recent price history on solid stocks, then I would sure as heck rather be holding short puts with premiums in my account than holding the underlying stock. As Tom K. pointed out last month when asked about a market correction, a conservative selection of OTM puts can withstand a quick downside hit of 10-15% and still be viable for holding to expiry and collecting premiums. And if someone really feels that the Dow is going to correct 2,000 points overnight, or the the Nasdaq 900 points, then you simply hedge your entire portfolio or sit it out for a month. IMHO, those who have been fortunate enough to profit greatly from buying options are the few. Those who have lost premium after premium in a wasting asset are the many. I for one am happy to be selling to them. I hope they stick around for a long time. And that's what makes the market go 'round. -David