09-13-2018, 11:03 AM
Question for those of you who simply play the premium game.
Before we get into details, the companies where I sell options of any kind are companies I don't mind holding for the long term. However I usually have my long term position already and I use the options play as a separate strategy, with a separate amount of $ that I keep in option plays. The reason I use companies which I already own is simple: I keep an eye on them more than I do on others. And if I've qualified them to be long term holdings then there should be less risk of a catastrophic failure because I do like the company and their fundamentals.
So, back to the question.
You sell a put, basically hoping that it won't go that low. So the profit is the premium. What do you do if it does end up below the strike? Take a loss and buy the option back? Take the shares and sell a covered call more or less on the money?
Before we get into details, the companies where I sell options of any kind are companies I don't mind holding for the long term. However I usually have my long term position already and I use the options play as a separate strategy, with a separate amount of $ that I keep in option plays. The reason I use companies which I already own is simple: I keep an eye on them more than I do on others. And if I've qualified them to be long term holdings then there should be less risk of a catastrophic failure because I do like the company and their fundamentals.
So, back to the question.
You sell a put, basically hoping that it won't go that low. So the profit is the premium. What do you do if it does end up below the strike? Take a loss and buy the option back? Take the shares and sell a covered call more or less on the money?