Selling spx put options for income. Is there a reason for waiting for the expiration date? Why not buy the put back before the expiration and pocket the credit? Pros and cons of this method?
It depends on precisely what you wish to accomplish. Closing the short PUT prior to expiration is probably the most common way to trade them. Closing early frees capital.
It has to be worth less than you sold it for to make anything. I usually buy back if I am in profit by 50% of the premium I received. Then I sell another
Pro: You avoid possible losses stemming from sudden unfavourable changes in price at the last minute close to expiration Con: You don't earn the full premium by not holding it until expiration upon which the price of the option becomes zero I usually hold it out until expiration to earn the full premium especially if I know the market well. Why earning just some of the money when you can pocket all of the money if you just hold out for 1 or 2 more days?
Selling Puts is actually a phenomenal strategy to use, at the right time of course. Every 5-10 years the market gets so battered, and put premiums get so high, it's almost a given to make money. The trick however is, you must WANT that stock, and be fully prepared to pay for it, if the market continues to dump. So it's really a long term stock accumulation strategy. Buffet knows his options, and you know he knows risk as well, so I wouldn't be surprised if he's a seller of billions of $ worth of puts every now and then.
buffet isn’t save for a big trade in 2005 which was likely due to a regulation change that caused those options to be very expensive. And he couldn’t hold onto the position in 2008.
Put owners/buyers going into March's crash made generational money. Some prominent put and premium sellers lost 10+ years of earnings in 1 week in March. Don't be a lazy put seller.
Is that true? I thought he maintained the positions (which of course went on to expire worthless ie 100% profitable for him).