12-17-2013, 10:09 PM
Perhaps I misunderstand the strategy. I thought what it means is that I sell the put and essentially offer to buy F at, say, $15, and I collect the premium. If my thesis is right and F rises, the put expires worthless and I walk away with the premium. If F declines, I’ll either have to buy out the position at a loss or buy the shares at $15 each. If that is how it works, I guess my problem is that I don’t want to accumulate any more shares long, and I don’t want that downside exposure. If I just dabble in inexpensive call options, all I’m risking is the premium I pay for those options. Have I got it or am I overlooking something?
Here’s another question for you while I’m at it. Say I’m looking at the Jan 2015 calls, what does conventional wisdom say about choosing a strike price that is in the money or out of the money? I guess I’ve assumed it is better to grab something with a little intrinsic value, but perhaps it makes no difference?
As I write these questions, it is perhaps apparent that I know so little that I have no business playing around with options at all. So I’ll just reiterate that this is for fun and learning and speculation only and I am only playing with very very small amounts of money that I would be fine losing.
Thanks so much for your help!
Here’s another question for you while I’m at it. Say I’m looking at the Jan 2015 calls, what does conventional wisdom say about choosing a strike price that is in the money or out of the money? I guess I’ve assumed it is better to grab something with a little intrinsic value, but perhaps it makes no difference?
As I write these questions, it is perhaps apparent that I know so little that I have no business playing around with options at all. So I’ll just reiterate that this is for fun and learning and speculation only and I am only playing with very very small amounts of money that I would be fine losing.
Thanks so much for your help!