re: Best place to invest today?

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Can you walk through the numbers on selling puts?

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Stock XYZ is trading for $10. 100 shares would cost you $1K plus your commission, likely no more than $2.

You sell a $9 put out to October 2017, someone pays you $.50 for the put. One put gives someone the right to sell you $100 shares of XYZ at $9. They paid you $50.00 (.50 X 100 shares).


If the stock doesn't get below $9.00 by expiration date, you keep their premium ($50). If the stock goes to $8.75, the shares are put to you at $9 ($900) but your cost of entry is reduced by premium collected (-$50), so you really bought the shares at $8.50 (exercise costs, commission etc need factored in).

If XYZ goes to $15, likely your $9 put you sold for .50, goes down. Let's say it goes down to a nickel. You can buy back the put for a nickle (closing your exposure). Collected $50, paid $5 to buy to close.

10-12% yield isn't uncommon doing this. Annualized.

But you selling naked, which is to say selling a derivative on a security you do not own, so be prepared to own the stock if things go badly. And you'll own it at the strike price you sold the out at. But likely naked only insofar as your broker let's you. You're going to have margin and cash requirements to do this. At least the vast majority of retail traders aren't going to be getting portfolio margin, and greatly reduced interest rates, costs to exercise, commission etc.

But if you have an account minimum of I think $25K, maybe it's $100K, Interactive Brokers will portfolio margin your account if you pass their risk management requirements, and you'll have direct access to choose where to place the trade, potentially some commission rebate for adding liquidity to the market, and including dark pools of liquidity (to the extent any retail trader can ever get).

I think my trades are below .01 per share, and I think my interest rate is 1 something.

I don't trade a lot, but I do write options, so the lower cost to carry's greatest benefit to me is increased yield when I sell puts. Most times you're really making maybe 5%, but making 5% in some situations in 2 mos, so the annualized yield is pretty large, but it is work. It isn't something you can just do and forget.

Which brings me back to one of the points I've tried to make. My short term put selling strategy is designed to produce yield. My long range put selling strategy is all with stocks that if I end up owning them, I don't mind owning them.

I sell a lot of puts on junior precious metals miners. It is almost entirely for yield. And the puts I sell are largely way, way out of the money. I did get some of these companies put to me, but I kept them until fairly recently, when the junior miners led the minor recovery in gold and silver, and I dumped the securities. But I follow commodities, and the junior miners I sold puts on weren't in any danger of going broke. Following this, I knew when (and that in this case was a couple of years) gold and silver recovered, junior miners are always a leading indicator, and always jump up dramatically. They overreact. Consequently why I sold as soon as feasible. But that money just sat there for a couple of years. One was paying less than a penny in dividend.