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Started By
Message
Is Selling Puts a viable piece of my portfolio
Posted on 11/12/19 at 4:04 pm
Posted on 11/12/19 at 4:04 pm
I'm young and just starting out mid to late 20's. Outside of my work 401k, I have my wife's Roth and my own Roth total value <10k currently. Outside of my work 401k which only holds VFIAX, I hold FOCPX and she holds FSKAX and FSPTX.
I saw TigerJag's post about selling covered calls and I thought to myself that this would be a great way to create small wins (<5% or whatever is typical) of gains on capital by way of premiums or end up holding a stock you already would have wanted anyway.
Is this something that you would recommend pursuing learning more about and eventually implementing it into my currently small portfolio.
The only thing I was thinking that would make it difficult is with only so much capital you could only make 1 play or 2 and still have the capital necessary to buy the stock.
Can you buy half options, like 50 shares, or quarters?
I saw TigerJag's post about selling covered calls and I thought to myself that this would be a great way to create small wins (<5% or whatever is typical) of gains on capital by way of premiums or end up holding a stock you already would have wanted anyway.
Is this something that you would recommend pursuing learning more about and eventually implementing it into my currently small portfolio.
The only thing I was thinking that would make it difficult is with only so much capital you could only make 1 play or 2 and still have the capital necessary to buy the stock.
Can you buy half options, like 50 shares, or quarters?
3
Posted on 11/12/19 at 4:29 pm to CorkRockingham
you can sell spreads and iron condors or butterflies to reduce the amount of capital needed
Posted on 11/12/19 at 5:19 pm to CorkRockingham
Your thread title says selling puts and in the body of the message it says selling covered calls. These are two different things.
When you sell cover calls you would own the stock and sell calls against it collecting a premium. If the stock stays below the strike price at expiration you keep the premium and the stock you wrote the calls against. If the stock goes above the strike at expiration then you would keep the premium and your shares would be sold at strike price.
When you sell a put you collect a premium and as long as the stock stays above the strike price at expiration you simply keep the premium. If the stock drops below the strike price at expiration then you keep the premium and the shares would get assigned to you, forcing you to buy x amount of shares at strike price.
Both are conservative ways of playing the options market.
I would do some more research and try paper trading this method first.
To answer your last question, no.
When you sell cover calls you would own the stock and sell calls against it collecting a premium. If the stock stays below the strike price at expiration you keep the premium and the stock you wrote the calls against. If the stock goes above the strike at expiration then you would keep the premium and your shares would be sold at strike price.
When you sell a put you collect a premium and as long as the stock stays above the strike price at expiration you simply keep the premium. If the stock drops below the strike price at expiration then you keep the premium and the shares would get assigned to you, forcing you to buy x amount of shares at strike price.
Both are conservative ways of playing the options market.
I would do some more research and try paper trading this method first.
To answer your last question, no.
Posted on 11/12/19 at 5:32 pm to CorkRockingham
TigerJag? 
That's actually a pretty cool name. Maybe I'll change. 
It's a perfectly viable strategy. But what I would really, really, REALLY do is take a few weeks or months and learn exactly what options are about. Learn the terms and about the mechanics of the market and how things work. Then paper trade to test your knowledge. And only then should you place trades with real money.
But yes, that's typically how people get started with options trading. Usually they start with covered calls, then move on to cash secured puts and then they'll move up to credit spreads and multi-leg strategies.
All I can say is that people who take this seriously (you can't just "give it a whirl" for a few weeks or months), maintain appropriate position sizes, have some ticker diversity, don't over allocate this or ANY strategy... these people will likely make above-market returns longer term selling premium in a high probability system. I don't try to hit homeruns. I try to hit singles 10-15 times a week.
My suggestion: go to the Option Alpha site and take advantage of all the free tutorials and/or the podcasts. You don't need to pay anybody the first dime as long as that site is up. I've been trading options for years (stocks for decades) and I've learned more at Option Alpha than all of the other resources put together.
Here's an episode that I think you might enjoy:
OAP 107: Interview w/ Option Alpha Member MACDDaddy & The “Wheel Selling” Options Strategy
That's actually a pretty cool name. Maybe I'll change. It's a perfectly viable strategy. But what I would really, really, REALLY do is take a few weeks or months and learn exactly what options are about. Learn the terms and about the mechanics of the market and how things work. Then paper trade to test your knowledge. And only then should you place trades with real money.
But yes, that's typically how people get started with options trading. Usually they start with covered calls, then move on to cash secured puts and then they'll move up to credit spreads and multi-leg strategies.
All I can say is that people who take this seriously (you can't just "give it a whirl" for a few weeks or months), maintain appropriate position sizes, have some ticker diversity, don't over allocate this or ANY strategy... these people will likely make above-market returns longer term selling premium in a high probability system. I don't try to hit homeruns. I try to hit singles 10-15 times a week.
My suggestion: go to the Option Alpha site and take advantage of all the free tutorials and/or the podcasts. You don't need to pay anybody the first dime as long as that site is up. I've been trading options for years (stocks for decades) and I've learned more at Option Alpha than all of the other resources put together.
Here's an episode that I think you might enjoy:
OAP 107: Interview w/ Option Alpha Member MACDDaddy & The “Wheel Selling” Options Strategy
Posted on 11/12/19 at 5:36 pm to thatguy777
Fwiw, the OP said this
quote:
Is this something that you would recommend pursuing learning more about and eventually implementing it into my currently small portfolio.
Posted on 11/12/19 at 5:37 pm to iAmBatman
I don't get why people down vote people who are trying to help. Maybe he's not ready for spreads yet, but yeah, that would be the next logical step for him to make more trades, make his capital go further and limit his risk in a defined manner.
Yeah, I know up votes and down votes don't really matter. But I shake my head sometimes.
Yeah, I know up votes and down votes don't really matter. But I shake my head sometimes.
Posted on 11/12/19 at 5:54 pm to castorinho
I was just explaining the difference to try and help him understand more. He said selling puts then said covered calls...I was trying to help him understand the difference.
Posted on 11/12/19 at 6:28 pm to Jag_Warrior
I have a few serial downvoters so the downvote is most likely from that and not the actual content itself.
Some people have a lot of free time on their hands
Some people have a lot of free time on their hands
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