Money and Finance
I have 2 option strategies that I like the most and then a third that I don't have enough positions built up to think about at the time.
1. I like selling put options since you can essentially set your entry price and get paid a premium to wait for the price to come to you. The downside to selling puts is that you could have possibly bought in at a lower price should the markets make a big downward move.
2. Buying call options in the form of LEAPs. Long dated call options. The plus for this is that you can get the right to buy the shares at a predetermined price at some point in the future. I like this whenever I feel that long term the stock price should return to the value that I expect, higher than the strike price + premium. The reason I prefer LEAPs to shorter duration calls is that you get more time for things to play out. The downside is that you can be left with nothing to show for it if the stock price takes longer to materialize or if other factors change.
3. Selling call options. I haven't really dabbled too much into these mainly because you have to have significant positions built up. At least 100 shares per contract that you want to sell. What I like about them is that you can get essentially a second dividend on the shares in the form of the premium. This premium can drastically increase the compounding of your capital. I would prefer to sell shorter duration call options, 3 months or less. The reason I prefer to sell shorter duration calls is because stocks don't typically move as far and as fast as they have the first 3 months of this year. The obvious downside is that you're risking losing the shares should the option be expired.
I'll be posting more information on the calculations that I go through for each option strategy. A lot of people hear about options and are scared away but I feel they offer an opportunity to get the entry price you want or to sell at a given price that you feel the shares are overvalued at. They can increase the compounding which as Albert Einstein is quoted as saying is "The most powerful force in the universe."
- The Best Of Both Worlds: Put Options
Obviously the most important part about investing is finding the truly great companies that have the ability to grow profits and dividends for decades on end. Once you identify those companies through a qualitative analysis the next step I like to take...
- Lots Of Options
No this post isn't about all the great investment opportunities that Mr. Market is giving us, it's about all of my recent option trading/selling activity. There's been a lot more activity on this front than I expected to be reporting. My...
- Recent Transaction
Yesterday I sold another call option on some of my shares of HAL, my ESPP shares. I'm currently way overweight my employer's stock. I have just over 184 shares from the first purchase that went through that has already reached LTCG treatment...
- Option Buyback?
Back in the beginning of February I sold a call option for HAL with a strike price of $42 for $1.60. The option expires on July 20th. Based on the sale if the option expired I would have earned $151.97 over about 5 months. This would have been a total...
- Recent Transactions
Today I sold 2 option contracts in an attempt to add some more income. The first contract that I sold was the BAC Jan 18 2014 $7 Put for $1.73. If the option gets exercised then my cost basis for this transaction will be $5.27. If the option expires then...
Money and Finance
Option Strategy
I have 2 option strategies that I like the most and then a third that I don't have enough positions built up to think about at the time.
1. I like selling put options since you can essentially set your entry price and get paid a premium to wait for the price to come to you. The downside to selling puts is that you could have possibly bought in at a lower price should the markets make a big downward move.
2. Buying call options in the form of LEAPs. Long dated call options. The plus for this is that you can get the right to buy the shares at a predetermined price at some point in the future. I like this whenever I feel that long term the stock price should return to the value that I expect, higher than the strike price + premium. The reason I prefer LEAPs to shorter duration calls is that you get more time for things to play out. The downside is that you can be left with nothing to show for it if the stock price takes longer to materialize or if other factors change.
3. Selling call options. I haven't really dabbled too much into these mainly because you have to have significant positions built up. At least 100 shares per contract that you want to sell. What I like about them is that you can get essentially a second dividend on the shares in the form of the premium. This premium can drastically increase the compounding of your capital. I would prefer to sell shorter duration call options, 3 months or less. The reason I prefer to sell shorter duration calls is because stocks don't typically move as far and as fast as they have the first 3 months of this year. The obvious downside is that you're risking losing the shares should the option be expired.
I'll be posting more information on the calculations that I go through for each option strategy. A lot of people hear about options and are scared away but I feel they offer an opportunity to get the entry price you want or to sell at a given price that you feel the shares are overvalued at. They can increase the compounding which as Albert Einstein is quoted as saying is "The most powerful force in the universe."
- The Best Of Both Worlds: Put Options
Obviously the most important part about investing is finding the truly great companies that have the ability to grow profits and dividends for decades on end. Once you identify those companies through a qualitative analysis the next step I like to take...
- Lots Of Options
No this post isn't about all the great investment opportunities that Mr. Market is giving us, it's about all of my recent option trading/selling activity. There's been a lot more activity on this front than I expected to be reporting. My...
- Recent Transaction
Yesterday I sold another call option on some of my shares of HAL, my ESPP shares. I'm currently way overweight my employer's stock. I have just over 184 shares from the first purchase that went through that has already reached LTCG treatment...
- Option Buyback?
Back in the beginning of February I sold a call option for HAL with a strike price of $42 for $1.60. The option expires on July 20th. Based on the sale if the option expired I would have earned $151.97 over about 5 months. This would have been a total...
- Recent Transactions
Today I sold 2 option contracts in an attempt to add some more income. The first contract that I sold was the BAC Jan 18 2014 $7 Put for $1.73. If the option gets exercised then my cost basis for this transaction will be $5.27. If the option expires then...