Trading Puts and Calls

I wrote puts on 2 stocks I was willing to hold long. I made a little bit of money on one and broke even on the other - but I strictly wrote puts, near the money, pure long position stuff (i.e., I was okay taking the stock if the put was exercised).

You will want to learn how to do straddles to protect you from unexpected fluctuations, though, if you want to really get into it - you can still make money if you're right on you price points, but straddles act as an insurance policy.

I write puts all day long. Usually only weeklies, or out no longer than a month. I've written in the deep money puts and out of the money puts. The vast majority (vast) expire worthless to the put buyer and I keep their premium. On occasion I need to buy one back at a stop loss. On occasion I have no problem if certain shares get put to me.

Put options expire worthless a vast percentage of the time. Some studies have indicated almost 80% of the time. The best study tracked only index options and the most heavily traded ones. Equity and commodities.

Now if put selling is cash secured, and you are prepared to have shares put to you, why wouldn't you do this where appropriate? It gets even more interesting if they are European style settlement. Shares can only be put to you on one day.

There are so many ways to not have shares put to you, it really should never be a concern.

I'll go further, I sold the SPY March 186 calls, and bought the SPY 186 April calls. Dangerous trade right? Please explain to me how it is dangerous.

Puts have always been more favorable to me for selling because there is a large market for deep out of the money puts bought by more sophisticated traders as insurance. They buy, and hope they expire worthless. I sell and hope they expire worthless. And if you have a decent options platform, you can see exactly who is buying them from you, and you can figure out why. Especially in commodities.

Before a stock dividend, distribution, or ex-dividend date, selling options is almost like taking candy from a baby, as most don't understand what will happen to the underlying shares, and have no clue what the adjusted option might look like after adjustment. Except CBOE published exactly what it will look like.

Google, Click, Read. 10 minutes, Done.