Your decision to buy the stock once it falls to 24 has nothing whatsoever to do with the options trade. You could have elected to buy the stock at 24 without doing the options spread and that way you would have saved yourself a 50 cent loss plus commissions on the options. You also might want to rethink your idea that a dividend paying stock will not tank in a bear market. I would suggest you see how well dividend paying stocks did in the 2008/9 sell off. Here is a hint they tanked just like non div or low div stocks. Sorry but selling a vertical put spread in no way allows you to buy stock below the market. In fact when we read both your original post at the top of this post and the above quote which is a later post of yours, your two posts are in contradiction to each other. In your first post youâre talking about buying stock below the market and not losing on the options trade. In your second post you are taking the loss on the options trade and buying the stock at the current market price. The fact that the stock is below some price in the past is meaningless since you canât trade on past prices. No offense but your facts are grossly wrong here and the decision to buy a stock once its fallen from a previous price has no bearing a vertical put spread you previously sold which may or may not be a winner. Most importantly none of the trades you discuss except for buying the stock outright will have anything to do with a dividend play.
You are right, you can't trade on past prices. Maybe, I should put this a different way. I notice a stock that I previous made money off of trading long which is paying a nice dividend. However, I don't want to buy it at its current price since I think its it may be slightly overvalued. How would you suggest I use an option strategy in order to be able to purchase the stock at either a lower price and/or collect some premium without taking on extreme risk. Risk being defined by a loss of more than 5 points with the stock trading at around $ 25.50/sh.
I am sorry but the price of the stock is the price of the stock. There is no magic bullet which allows you to buy stock below the current price. Now collecting premium is an entirely different matter. There are a myriad of strategies to sell premium, and you touched on one, the vertical put spread. The issue here is that the vertical put spread has nothing at all to do with trying to buy stock below the current market in the stock.
Your short strike should be at a price that you're willing to buy the stock at (give or take the amount of premium received). The particular strategy (naked, vertical, etc.) depends on how much risk you want to accept.
LOL all spin did was rephrase the same info I gave you. You're willing to buy the stock at the lower strike price. Thats fantastic, except what you missed is it goes without saying that you would take max loss on the spread should the stock go to that lower strike and you would not be buying the stock at below market value. Sorry if the facts upset you but there is no strategy which allows you to buy stock below the current market value, commen sense says that if such an arb existed it would have been arb'ed out of the market long ago.
What you say did not upset me, it just was not that intelligent compared to the other poster, sorry if that makes you sad. spindr0 has provided all the information that I need, mod for this thread, feel free to close.