11-12-2013, 09:05 PM
No, one bad trade doesn't wipe out many good trades. Say one option costs $500, I look for a $500 gain. Usually within 6 months that is attainable somewhere in that time frame.
If the stock price goes the wrong way, your max loss would be $500 and that rarely happens. Many times the option still has some value near expiry, like 100-250.
One does not get keep any dividends paid over that period however, in this part of my portfolio I do not exercise the option and take ownership of the stock, it is strictly an income generating component of my portfolio.
If the stock price goes the wrong way, your max loss would be $500 and that rarely happens. Many times the option still has some value near expiry, like 100-250.
One does not get keep any dividends paid over that period however, in this part of my portfolio I do not exercise the option and take ownership of the stock, it is strictly an income generating component of my portfolio.