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Naked Puts strategyNaked Puts strategy
Hobbyinvestor said: "Hello,
I'm fairly new with options. What do you think of this strategy:
Sell naked puts out of the money on quality stocks that I would like to own. I only want quality stocks in case I end up owning them. In that case, I would sell covered calls, and then repeat.
Q's:
How can I find quality stocks, with out of the money Puts that pay well? For example, Citigroup's $47.50 March put only pays me .15
If I want to sell a put, do I look at the bid, or ask price?
Your opinions are appreciated!:whacky011:"
holzie said: "You like at the Bid. The strategy is mentioned a few times in other threads on the options forums. It's a sound strategy by the way, one that I use myself.
Holz."
Hobbyinvestor said: "Thanks Holzie. Maybe next week I'll sell a put. I'm waiting for the market to settle."
holzie said: "[QUOTE=Hobbyinvestor]Thanks Holzie. Maybe next week I'll sell a put. I'm waiting for the market to settle.[/QUOTE]
Yeah wait a little, but make sure you really really want the stock or otherwise you will panic and you will try to buy the put back if it goes in the money. which you really wanted in the first place.
For example, I have been buying a lot of IMH this year through puts. This month my 7.50 put is way in the money but that's cool. Eventhough I will probably be put the stock higher than it is now, I still like the company and the 13% dividend I have been getting is very worth it. Just an FYI.
Holz."