Writing "juicy" puts for the sake of taking in premium in the long run is a very inferior strategy. I realize there are always exceptions. However this is generally how it can play out over time with respect to the average retail investor like myself. You start out light and slow, maybe selling puts on underlying that you actually would not mind owning. Then after a few months of seeing the puts expire worthless, pure excitement and that little homer simpson light bulb in your head goes off. You figure you have just discovered a new wheel. You are a genious. You can make 10-15% per month doing it! Before you know it, you are using leverage and selling puts on underlying that is well beyond your buying power. But all you see is that juicy nice premium monthly cash flow coming in. Maybe you even start dabbling with higher IV and start writing puts on companies before earnings or maybe an FDA decision. I assure you, unless you baby sit your position with some kind of hedge, whether it is days, weeks, months, or even a year or more, eventually it will catch up to. Like it did to me. I had my first options account pretty much blown out this way. Sold a bunch of Qlogic puts years ago. Juicy premium there. The worst part is, I could have closed them within a couple days of the expiration for like a nickel or dime. But greedy me did not wanna pay the commission on the trade. And the puts were so out of the money, I just was already thinking ahead til the next expiration and what I was gonna write. By 11AM on that expiration Friday. Qlogic did the unthinkable and the PPS completely tanked. I literally lost nearly two years of gains along with a chunk of my own capital in a matter of minutes. The puts went parabolic against me as the PPS tanked well below my what were thought to be deep out of the money puts, that now were in the money. But that is life in the fast lane. Your best bet in writing puts long term is to do so as with the same mentality you would place a limit buy order for a stock. Do not use leverage beyond your buying power and make sure you want to own the underlying.
Thank you Delta. Nothing wrong with selling a put here and there on something you want to and can afford to own all that stock AT THAT STRIKE!!! I can understand the sentiment to not wanting to wade through books. Perhaps check out the free education over at www.cboe.com. I paid for my education and it was a good one but I'm going to do their complete program over there as they seem heavily into understanding the core of the options pricing model. Juice = Risk .. the only "juice" is that you may be able to sell a contract for .45 as opposed to .30 and so your commission costs fade as a percentage of your profit.