How's your buy and sell timing?

[fenders53]

(11-27-2018, 02:51 AM)crimsonghost747 Wrote:

(11-26-2018, 11:22 PM)fenders53 Wrote:  Selling covered puts to enter long positions is the smartest strategy I've ever employed.  It's a can't lose proposition if you are going to buy the stock anyway.

That is not exactly true. You could be forced to buy in too early, for example with a short term put during a large correction you'd be going in on the stock at the beginning of the correction and if you were holding onto long term puts you're entry price could be tens of percentages higher than the current market price.

There is also the other thing where you keep selling puts but the stock simply goes up and up and up. You will keep collecting the premium but end up one day with an entry price significantly higher than you would have gotten by just buying it in the first place.

I do like puts too but you have to remember that there is no such thing as a free lunch.

They definitely work best in a sideways to slightly up market.  That is when they are just about a free lunch.  Generally works well in a slightly falling market if you are nimble because it is easy to roll a contract forward in those times and drop your entry basis further.  Still end up with a better entry than just going long a few months ago.  Obviously doesn't work as well if the market is falling fast, but you are dropping some equity  whether you go long or enter with a put.  Selling a put is going short, but not in a meaningful way the way it is used in my strategy.  I'm not selling a high volume of puts 20% out of the money.  If a stock is going straight up and living in overbought RSI, I won't chase it selling puts.  Once or twice and I move on as it wasn't meant to be. (going long).  My personal put selling rules are simple, but that is definitely one of them.  MCD is a good recent example.  Owned my initial position at a low price.  Attempted to increase it with puts and collected premiums.  Sure I would have been better off just going long, but MCD is a rare example in this market.   Certainly among the stocks I wish to own at this time.    

Back to the point, it beats my record of timing entries when just going long.  Dollar cost averaging over ten years is better, but I am getting older now and this is the most conservative entry method I have found.