Only if the stock doubles, by exp You are just adding to a losing position. Averaging down to put some lipstick on it.
? What's expiry have to do with it? I'm fully intending to be assigned. I don't think you're understanding that if you are selling an itm put it's the same as buying at the money because you're receiving premium. Example with ABC stock @ $5 1000 shares @ $5 = $5000 10 puts @ $10 = $10,000 - $5000 in premium = $5000 In both scenarios, you will have a 1000 shares at an average cost of $5. It doesn't have to "double"...it has to return to the top of the channel...doubling is irrelevant. Next thing you're going to tell me that it's harder for a stock to go from $5 to $10 than it is to go from $10 to $5 LOL.
then it's not "profit" by definition, innit?? if it doubles in a defined space of time (expiration), you gain your premium (profit) if it stays where it is, you make zero, if it goes down, your loss increases because you just added to a loss. 2+2=4 But if you think it's a smart move, go for it and enjoy
You gain your premium no matter what. But, yes, this is the ideal situation. Essentially, instead of buying now and waiting for it to double to close out for a profit, you took the profits (premium) now and closed out later. No. You collected the premium. No. You collected the premium.
you collect a premium itm, without much extrinsic value. Stock at 6, sell 11put to take 5 premium. Stock expires at 6, assigned position entry is at 11, PnL= -5 5 collected - 5 pnl dd = 0
You are misinterpreting the intent here. If the price is $6 and I am pretty certain that it will be back up to $12 in a month or so, then I can either buy @ $6 now and wait for my profits...or I can sell a $12 put and take the (future) profits now. Think of it as an advance on profits. If it doesn't pan out it I still get the premium so my break even is still $6. More importantly I have the premium to use for other things.
This is where you are confused. 5 collected is the important part here. I am generating cash flow NOW which is the whole point. The paper loss is irrelevant. It's almost like borrowing against your position.