#OT #SellingPuts – I’d like…

#OT #SellingPuts – I’d like to continue the discussion about Put selling strategies.
Someone asked for my #FallingKnife strategy. I wrote this up some time ago for SMM.

#SellingPremium – Some rules – there is NO guarantee with my methods. There is, however, a high probability that my option sales will work.

Some reasons and guidelines:

1. Never sell short puts(or calls either) unless you are “willing and able” to take assignment at the strike price

2. Distance – my strike prices are mostly well away from the current market price. You can be wrong on the stock but still right on the option

3. Time – with each day/week/month that passes, the time remaining on the contract shrinks, and so does the value of the option

4. Support/Resistance – I most often choose strike prices at or below recent support levels

5. Diversification – I have a large portfolio of short options, spread across many industries. Some stocks rise with the market, some do not

6. Hedging – I am sometimes shorting an option because I have a large position in the other direction. This helps balance out risk. Selling both puts and calls in a “strangle” means that at least one side will always expire at a profit

7. Patience – you can’t let short term moves against you in the underlying stock shake you out of a position that is working(still out of the money) or has many months left until expiration. Stocks are cyclical. Most often, if you wait, the stock will reverse in your favor if you picked your strike prices well. (see #4)

8. Risk Management – Don’t concentrate short option positions at a single strike price or a single expiration date. Create an Option Ladder. As each expiration date rolls around, it automatically reduces your portfolio risk as positions fall off your portfolio.

9. You can always cover.

Email me at option_iceman at outlook dot com if you need more info or guidance.