You sell an option at a set up point where you would like to get long the stock. You get paid to wait for your setup. That’s how I see it
That’s exactly how I think about as well. But this no-pullback market got me to the point where I jus say - F it, I will sell close to ATM put to start initial position and then add if stock dumps hard. Desperate times call for desperate measures
Well, most stocks are correlated to the market. Some just not volatile enough to bother with. Some are too volatile. Some are too expensive for my account size. So that leaves me with pretty short list of stocks. But I actually prefer to deal with a few stocks that I think I have a "feel" for. Selling premium is just a way to get some "income" while the market is dull.
A question I have for those who sell premium for a living...... It seems with cash covered puts you know your risk it isn't really infinite. The danger more seems to be in selling naked calls. You can roll up and back but you're really just keeping a loser open if it doesn't revert to the mean. Does anyone who sells options for a living just set a buy stop on the stock for the option strike + the premium received. If it keeps going parabolic you have no more risk provided you had the capital to buy a hundred shares. Granted there is whipsaw risk that it comes back and forth at the strike but you could just keep taking the hedge on and taking it off. What am I missing?
Spaghetti Code, interesting statement when you say SPY has been a bumpy road since 1993. Obviously, its gone way up. What do you mean exactly by that statement? Just more volatile than previously generally? Bigger pullbacks? Or what? Thanks.
I don’t short naked calls mine are always covered. If you were going too, you would need to have some type of stop loss %. But honestly it’s just a bad idea to do it on any type of company (GME). You would be better off doing it on indexes.