RFI - Cash Secured Puts
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RFI - Cash Secured Puts
Request for Information (RFI) on Cash Secured
Puts. I've been watching a couple of stocks that I think would be good additions to my portfolio. I'd like to add them on with CSPs. Here is my problem - the premiums are not calculating out as good uses of my money. I'm a Tenthousandaire multiple times over, so I'm looking at adding a 100 or 200 shares of a company at a time. To get the APR and pick up $100 bills, I need to write multiple CSPs, write CSPs in or at the money, or go so far out that I'm uncomfortable with the technical guesstimates. Are CSPs substantially lower value for covered option writing than covered calls? I know my FAST success was abnormal and not to be expected, but... CSPs appear to be a Hundredthousandaire's game. Malcolm Malcom: This is a quick and overly simplistic reply, because I think it's somewhat a case-by-case decision. But to get the premium paycheck up, IN GENERAL my preferences would be to (in order): Do multiple CSPs (if it's a smart move for one contract, it also ought to be for multiple contracts, and it lowers the per-share commission/fees) Move closer to the money (at the money sometimes works for me, but I don't know about in the money) Go farther out in time (but I normally avoid going beyond the first month) --Ron From: cool_club@bivio.com [mailto:cool_club@bivio.com] On Behalf Of Malcolm Myles Request for Information (RFI) on Cash Secured Puts. First let me say I know several successful Tenthousandaires (I like that name) that are trading covered options so do not let that scare you off. Second, not all companies are going to have good premiums on PUTs and CALLs all the time. Sometimes the premiums will be good and sometimes they won't be. It will be based on how much angst there is around the stock which of course is driven by both fear and greed. Sometimes, this angst comes ahead of earnings and inflates premiums (try to avoid this temptation) and sometimes it happens after earnings which can be a golden opportunity. Right now there is not a lot of overall angst in the market and so premiums are not terribly rich. Sharon McAllister was sharing with me the other day that the technical folks will tell you that often at a market top you will have very low VIX (volatility on the broad market). As we have learned, low volatility usually means lower option premiums. At last nights COOL_Club, I mentioned Align Technology (ALGN). It is an example of a situation in which there might be an opportunity which would not involve huge cash reserves, Of course, I wouldn't recommend any trades without a fundamental understanding of the company and a thorough analysis of the reasons for the price drop. If you did those things and felt the drop was overdone, it might be a situation to take a look at CSP's Even three contracts on ALGN would be exposing under $10,000 That seems like it would fit in what you are looking for. I am not recommending doing it, I am just saying it is an example of the type of situation you want to look for on this or other smaller price stocks. Get to know them really well, watch for what they do after earnings and see if you see opportunities. Good luck and Good Selling, Paul Madison On Mon, Oct 15, 2012 at 11:47 AM, Malcolm Myles <malcolm@mmyles.com> wrote:
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