re: Can Someone Explain Selling Puts?

The way I look at it is that if I believe in a stock enough, I just want to own it outright.

Knock yourself out skipper. But remember that each contract controls 100 shares. I can't offer any further info because I barely do options.

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1)collect $2700 on 1000 shares immediately and if it exceeds $92.50 on sept 21 I walk away with $2700 in 3 months

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Not doing the math but if the stock goes up you collect the premium, yes.

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2)stock drops below $92.50 on september 21 and I own 1000 shares at basically $89.80 counting my premium

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This is correct as well. But if the stock dropped to $50 you are overpaying just a tad don't you think? The person you sold the option to made a killing at your expense, which isn't a win-win situation at all.

I would suggest doing some good reading on this before diving in so quickly. Find a book on the basics of options(maybe an old Series 7 book) and read about them on investopedia. The fact that you think these are "no-risk" transactions shows that you aren't ready to do this stuff. If you can't explain an investment to someone else it's typically a bad idea to do it on your own.

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I mean Phillip Morris can't really drop to $50 it would be yield 7% and would be the no brainer of the century

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Or, they could cut the dividend. Ask longtime GE shareholders about that.

If you think you've found a no-risk method of making money off of any stock, you haven't.

I just don't believe he's ready for this. He says he is but he doesn't even understand the basics. He'll get there, but it's not today.

guys these points are all spot on, but im not in philip morris for a gigantic position for any of those reasons

1.philip morris sells everywhere but the US and China, but they're licensing deal is getting marlboro in there slowly but government run cigarette companies are what own china

2.They're a play on a falling US dollar

3.They don't deal with any US litigation they spun off Altria and left them to deal with it

4.Actually the sheer number of smokers is increasing with the world population growing and PM actually lost 7 cents last quarter on currency fluctuations bc they technically turned a 1 cent profit

5.Indonesia and vietnam growth in smoking is astronomical, plus PM is about to start selling US chewing tobacco overseas

6.its an addictive product that so happens to combine with phillip morris usa(altria) to be the best performing stock of all time so i dont mind even 10% price decreases

There's tons more reasons why im super long Phillip Morris but all im saying is i was planning on buying a ton this morning and I would love to pay $95.25 today so I don't see how if i did purchase today and the price fell to $85 that would be any different than attempting to purchase options or sell options whatever the term is. I know im an amateur but im not a complete idiot, I run a few small businesses and with a little guidance from someone i feel i could learn a little about risk/reward investing vs just tying up $100k to buy another 1000 shares at todays high price

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i was planning on buying a ton this morning and I would love to pay $95.25 today so I don't see how if i did purchase today and the price fell to $85 that would be any different than attempting to purchase options or sell options whatever the term is.

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You might want to look at 'synthetic longs'. Sell the put and simultaneously buy a call for the same number of contracts at the same strike price and expiration date. That way, you don't keep as much premium (actually it will probably cost you a little money, net) but you have an unlimited upside to go along with your potentially large downside.

Again, I recommend McMillan. I'd advise staying away from books on options trading that emphasize how anybody can do it and how you'll make a mint, or how it's the hot thing to put zing in your portfolio or whatever. But please, definitely, get hold of a reasonably 'academic' book on options before you commit money to the idea.

It sounds like you have enough exposure to benefit from using options to hedge as well as simply speculating with them, but you need to get an understanding of some of the math you need to deal with in order to be effective.

Good luck.

I'd better clarify.

I'm not in any way suggesting that you actually try to create a synthetic long, just that you do some more reading -- synthetic long is a reasonably simple thing to understand -- in order to get more of an idea of what options can do for (or to) you.