Thanks, I see.
sell-to-open in an IRA account?
- Thread starter loufah
- Start date
Thanks, I see.
Writing a put and holding it until it expires will either just give you credit (cash) if it expires out of the money (OTM), or will give you the actual stock shares at 100 shares per option if it expires in the money (ITM). The price entry for your stock shares would be the put option strike price.
Savvy investors often sell puts on stocks that they want to own at a lower price, usually solid dividend payers. If they don't get the stock they want, they still often earn about 20% per year selling the puts.
The most you can lose is if the stock price went to zero. That is limited compared to selling calls in which the stock price could just go up and up, causing a theoretical unlimited loss.
I find it interesting, that a put seller uses the idea that it is OK for a stock to drop below the strike, lose money and feel like he is buying a stock at a discount. If you wanted to own the stock at let's say 100, you would have bought it. You sold the 80 puts because you thought they would expire worthless. If the stock drops to say 75, something has changed with either the market or the stock. You might feel it's now a sell rather than a buy. I think selling OTM options is a great strategy. I also think you have to have a preset price that you either take off all or part of the trade if you are wrong.
Just my opinion,
1245
Just my opinion,
1245
Naked Put = Cover Call
If you can sell Covered Calls then you can sell Naked Puts. Do the math and you will see the reward and risk are almost identical.
If an investor--not a trader--was interested in a dividend aristocrat, and the stock dropped by 25%, the dividend pay out would go UP by 25%; it is extremely safe for this type of conservative investing, going after the dividend, not the stock price; it is similar to buying bonds
once again, it would have to be a very strong company, like XOM, not some crap company that is advertising high dividends
sometimes these conservative dividend investors are gleeful when strong companies' stock prices fall, for they can reinvest the dividends at lower prices, buying more shares; it is a true "buy and hold" approach that really works for those who have plenty of money and patience, and who are satisfied with consistent dividend payments year after year; and since interest rates are nearly zero, it is an fixed income alternative to bonds
I bought stock in a company that owned and managed the marts at gas stations. They paid a great dividend. Very stable. The they lost a contract for around 30% of their stations. The stock dropped very quickly because their dividend would change some time in the future. high rates of returns from dividend paying stocks mean the dividend is not safe. If it were, the price would go up and the return would go down. Don't get fooled like I did. They are not as safe as they appear. Not even in S&P 100 stocks. Look at the list from each decade and see what can happen over time.
1245
google "dividend aristocrats"--if someone diversified (that is key) into many such stocks, they would have a very safe source of dividend income; but very few at this website want a solid 3-4% per year; this is elitetrader, not eliteinvestor : )
Hmm, I've been selling naked calls on commodity futures in my IB IRA accounts for some time, no problem, as long as I maintain sufficient margin. I usually don't use more than 15% of my account value.