writing a put

[deaddog]

Welcome to the world of value investing

I tried that years ago, couldn't stand the wild ride up and down.

 

[TheDawn]

If I write a put of QQQ at a lower price with the intention to buy the QQQ at that price, do I need to cut losses?

Yes because you will be suffering an instant loss once you get assigned to buy at the strike price when the market price will be much lower. As long as you are prepared for that, you will be fine. Unless you intend to hold the stock for the long term and is prepared to deal with the downtrend in the "short-term", you will need to cut losses or at least at some time if the stock is not recovering within your expected timeframe.

 

[TheDawn]

LOL.
You would think he wants to own winners.
You sell a put and get the premium and then get assigned. You now have a long position and ther is no reason to not cut losses.

Well if his intention is to really own the stock for the long term, he can simply buy a put to hedge or write a call on it to earn some premium while the stock is going through a short-term downtrend.

 

[deaddog]

Well if his intention is to really own the stock for the long term, he can simply buy a put to hedge or write a call on it to earn some premium while the stock is going through a short-term downtrend.

So you don't think a trader should cut losses?
What is the long term? How long do you tie up your capital that could be earning a better return?

 

[TheDawn]

So you don't think a trader should cut losses?

When he sees it's no longer justified to hold the stock in the portfolio, yeah sure.

What is the long term? How long do you tie up your capital that could be earning a better return?

Depends on your outlook for the company and its stock. I don't have a definite answer.

 

[deaddog]

What is the long term? How long do you tie up your capital that could be earning a better return?

Depends on your outlook for the company and its stock. I don't have a definite answer.

At what point do you know you are wrong about your outlook for the company and its stock?

A lot of investors hit that point and continue to hold the stock for what ever reason. No one lies to themselves more than an investor underwater.

 

[taowave]

Heres the thing,he is writing a put on QQQ...IMO thats much different than writing a put on a stock..

 

[deaddog]

Heres the thing,he is writing a put on QQQ...IMO thats much different than writing a put on a stock..

Why?

 

[destriero]

Why?

SN (company-specific) risk.

 

[zdreg]

, so the trade could be relatively safe

Relatively safe in the stock market is non-existent.