that's what we have been telling her all along. THanks for repeating it. She might finally hear the voice.
The way I'm looking at it now I think the stock is going to be sideways for the next 2 weeks and then start to rise. I want to sell the puts now in case the stock pops earlier then I expect. What I did was sell the shares and then sell puts at a lower strike price to thwart another assignment.
Ok, so now you are in a naked put position again? Well, if this is the case, make sure that you close out the position if the stock price should threatens your break-even position in order to avoid another excercise. It is my understanding that conceivably, you could select options on stocks that will remain at or above the strike price and earn profits repeatedly over time by selling puts without the threat of excercise. However, it takes only one dip in price (gap down) to be exposed to excercise, and this risk cannot be overlooked. So, you should always be ready to purchase the shares at the strike price you specify -- which you consider to be a fair price for the stock.
The two books everyone should read before trading options: 1. Option Volatility & Pricing - Natenberg 2. Options, Futures & Other Derivatives - Hull You sold AAPL May 07 $115 Puts? There is only an open interest of 3 on those puts....thats your position i assume? <B>Theoretical Data</B> Implied Vol. 56.7807 Delta -0.9197 Gamma 0.0104 ** Theta -0.0225 ** Vega 0.0375 Rho -0.0827 If your going to keep that position open you better hope AAPL stays above its 50 day moving average (which is around $89.75), a break below that will be bad news.
Great point! And the key to avoiding assignments is knowing when and why are options assigned/exercised early.
Actually, MTE, I mispoke a little. She actually would know what she was going to get if the option were excercised because of the strike price specified. But, the price of the stock may have gapped much further down than the strike price at which she must purchase the shares. Therefore, she can end up with some very expensive stock in her account which will translate to a big loss if the stock is sold immediately -- and that would be the wipe out. Correct?
Yes, the stock can gap down and you'd end up with a big loss. I know what you meant. In any case, as I mentioned above, selling (writing) options requires you understand the mechanics (i.e. the reasons) of early assignment, if you don't understand the mechanics then you shouldn't be selling options as you have no way of gauging the assignment risk.
don't worry, the market is making new high everyday. You can sell all the puts you want... until the black swan returns.
I was betting that C and WMT would stay put and took losses on both of those. Ironically my losses this month was on the less volatile stocks and my winners were on the volatile stocks. Many of my picks are stocks that I'm betting will stay in the same price range so any big movement doesn't bode well for me.