- Only sell put options on stocks you want to own. Do not use this on high flyers just to receive the upfront income.
- Only sell enough contracts to stay within your comfort zone. If you normally trade in 500-share blocks, then only sell five option contracts.
- If you are uncomfortable at anytime during the trade, or do not wish to own the stock at the strike price you’ve chosen, then you can unwind the trade at any point. All you have to do is buy back the put options you’ve sold.
- The option price will fluctuate during the course of the trade. It may get cheaper or more expensive while you hold it. The bottom line is – you’ll either get to buy the stock at expiration or the option will expire with no value.
Monday, January 3, 2011
Sell a put (zz)
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