02-18-2019, 05:27 PM
So I've been following this discussion with one eye, and more or less agree with everyone. (How's that for diplomacy?!)
So far, I've just been dipping my toe in using cash-secured puts, but it seems like a no-brainer to me, at least insofar as a complement to my overarching buy-and-hold approach to DGI. I'll only sell puts on stocks that I'd like to own anyway, and only at prices that I'm happy with. When a stock that I want to own gets actually cheap, I'll probably still just buy shares outright, so as not to miss out on the bargain. But when it is in a reasonable "take it or leave it" range, selling a put seems like a great way to play it -- get paid to wait for it to maybe reach a slightly better price.
But I have to admit that when I run my spreadsheet and look at some of the annualized returns, I do often daydream about devoting a lot more cash and energy to the practice. My returns have ranged from 15 to 70 (!!) percent, annualized (if I'm doing the math right!). A few years of that with a good chunk of my portfolio and I'd be ready to retire! Of course, the question is risk. I love the idea of selling insurance in this manner, but I know enough to know that I have no idea how many different ways I could get creamed.
So for now, I'll continue to dabble, and perhaps expand my covered put practice as I gain more experience and confidence.
But maybe we should start a thread, kinda like the "what did you buy today" thread, where we just exchange good covered put ideas when we spot them? Such as "Hey, did you see that the April KO $40 puts are selling for $$ right now? That's a %% return annualized if it expires out of the money!" Thoughts?
So far, I've just been dipping my toe in using cash-secured puts, but it seems like a no-brainer to me, at least insofar as a complement to my overarching buy-and-hold approach to DGI. I'll only sell puts on stocks that I'd like to own anyway, and only at prices that I'm happy with. When a stock that I want to own gets actually cheap, I'll probably still just buy shares outright, so as not to miss out on the bargain. But when it is in a reasonable "take it or leave it" range, selling a put seems like a great way to play it -- get paid to wait for it to maybe reach a slightly better price.
But I have to admit that when I run my spreadsheet and look at some of the annualized returns, I do often daydream about devoting a lot more cash and energy to the practice. My returns have ranged from 15 to 70 (!!) percent, annualized (if I'm doing the math right!). A few years of that with a good chunk of my portfolio and I'd be ready to retire! Of course, the question is risk. I love the idea of selling insurance in this manner, but I know enough to know that I have no idea how many different ways I could get creamed.
So for now, I'll continue to dabble, and perhaps expand my covered put practice as I gain more experience and confidence.
But maybe we should start a thread, kinda like the "what did you buy today" thread, where we just exchange good covered put ideas when we spot them? Such as "Hey, did you see that the April KO $40 puts are selling for $$ right now? That's a %% return annualized if it expires out of the money!" Thoughts?