Hughes Optioneering

There is a simple answer to this question, but I will make it a bit longer and complicated. It may be difficult for novice investors to engage in options trading, because from everywhere around us we keep hearing how dangerous options are.

Mostly, people who are discouraging you from trading options have never traded options. They are just playing their old scratched record they have been taught at their last seminar. A simple put selling strategy is enough to make you profits others will never believe you can make. And yet it is possible to reach those numbers and without taking enormous risk with your money.

One way to reduce the risk is trading options against stocks you want to own. And as a dividend investor, which stocks do you want to own? If you understand basics of options, how you can make money using them, you will find out, that trading options is very easy, simple and not risky at all.

The best way to find out for yourself is to take a small trade and try it.

If you do not want to commit your own cash trade in a paper money account first. I did it myself recently even after two years of trading I still use paper money account to practice trading. If you let your mind thinking how dangerous it is and never try even on your paper money account, you will miss a great opportunity of your life.

I understand that it is not easy to get into a mindset of an option trader. I have been there myself. It is difficult at first when your understanding about options is limited.

But do not worry, you do not have to make it complicated. There are a few steps you can take and repeat yourself as long as you become comfortable with them. I did it myself a couple of years ago when looking at trades I would take. A rule number one — sell puts against stocks you want to own — dividend stocks.

Rule number two — choose a strike price you are OK to pay for the stock in case you get assigned when you will be forced to buy a stock. Rule number three — if you have a small account and cannot afford more contracts than one, choose as long expiration as possible to collect at least 1. If you can afford more contracts you can choose shorter term I like 56 days and go with a smaller premium for example 0.

Rule number four — check the stocks supports and resistances, is the trend bullish? Do you have a bullish or bearish expectations? If you are bullish, go ahead and sell the option.

If you are bearish on that particular stock, go and choose another stock or wait for the bearish trend to finish and then sell the option. Rule number five — sold your option? You collected a premium then. Never give it up! Were you wrong on your assessment and stock went down?

Do not worry, if the stock went ITM in the money, meaning below strike you have two options how to defend your premium:. Rule number six — never buy options. Have time decay on your side, not against you.

First, you do not have to know anything about Greeks behind option prices, valuation, or movement. All you need to know is what option is and how you can use it. All other stuff is just a noise. Second, you want a watch list of stocks you want to trade. Fourth, you need a good platform. I like ThinkorSwim platform, but you can use any other platform. Fifth, you need cash for cash secured puts or margin approval for naked puts.

But with naked puts when using margin, be sure you have enough cash anyway to potentially cover your assignment. It would be unpleasant being put a stock and not having money to buy it.

A put option is a right to buy or sell a stock at a certain price strike at a certain time expiration. Every option is a time sensitive instrument. That means that as it is getting closer to expiration, its value is becoming smaller and smaller as long as it gets to zero, but only, if the option is out of the money.

And this is the main reason why I do not buy options, but sell them. When you sell an option you get paid.

CFX Markets | Sell Your REITs

You receive a premium. By selling a put option to a guy on the other side you sell him a right to sell you his stock at a certain price at the time of expiration and sometimes even earlier. For this inconvenience you will get paid. You will get paid a premium.

And here you may say: It is a loss!! I can lose money! The advisors were right! And you freak out. This is a reason why I trade options sell puts against dividend growth stocks. Dividend growth stocks are mature companies and it is very unlikely that they would fall dramatically in price during market panic.

A few products of JNJ were recalled by a company and investors freaked out about it. It was a ridiculous sell off, which offered great opportunity to buy. So if any of the panicked investors out there decides to give up their stock use their right to exercise their option and assigns you to a stock like JNJ, will you be mad? Will you consider it as a loss? If your option gets in the money at expiration and you decide not to roll to a lower strike but accept the stock, you will be forced to buy at strike price minus premium a share.

And you start collecting dividends!

There are options traders out there who are very successful and they trade options for a living. One of them is a self-made multi-millionaire Teddi Knight from Ontario in Canada. You can find information on her website fullyinformed. Karen is another self-made millionaire who learned trading options and made millions. Karen the Supertrader could do it. Of course, it took her circa 5 years before she found her strategy and mastered it and then another 3 years to turn her account into a fortune.

She is now my role model trader. I will do all in my power to find out my own strategy to multiply my account the same way. Since I started with less money, it will take me longer.

Tell me, do you trade options or consider trading it? Are you afraid to start? I was afraid as a hell, but as time went by I realized how easy it was. If you need any help, write me an email and I can help you with a trade set up and you can learn and start your own money making machine — collecting dividends and options premiums. The authors 6 rules are excellent advice.

Two Ways to Sell Options - dakoxok.web.fc2.com

I have been selling puts for years. Works great in a sideways market. My only word of caution would be careful regarding how many puts you are short at any given time. A huge market sell-off would result in owning more stock than one would desire or incurring significant short-term losses tring to close positions.

I agree with you that knowing Greeks is not important. I have been trading options for 5 years and never used Greeks beyond observing Delta and Theta in determining whether I will be early assigned or not. The underlying stock and strikes are important, but what is even more important is to know what you will be doing when the trade goes against you and you do not even have to predict whether you will be right or wrong. I would like to join your group.

Selling puts to buy Dividend stocks is my main approach to my active investing. One thing I am not clear about is when in trading does one have to pay a dividend? Hi Pete, you would have to pay a dividend if you are short the stock. Options do not constitute the right nor obligation to dividends or other rights such as voting as the stock does.

So if you sell a stock you do not own prior to selling then you will be obligated to pay dividends. Hi Martin Excellent to the point real experience base article. May I find out before you put the trade can you talk about steps by steps process you go through to come up with the trade including looking at the chart, technical indicators you use for over sold over bought, trand etc.

What delta you use? And do you use naked put or spread and number of contracts you use as your trading fees are less so who is the Prefered broker you use. Looking forward to hear from you thanks a million. I would recommend you to join our Facebook group where we post our trades other traders too and explain all your questions there. Basically, though, I do not limit myself by delta anymore. I no longer trade SPX spreads where delta had its significance.

I trade options against stocks and do not mind opening at the money trade or near the money trade with delta around 30, 40 or even It depends on the trade of course, and my expectations.

So, I trade against stocks, dividend paying stocks,and I trade primarily naked options — both puts and calls — strangles, sometimes straddles, lizards or put or call ladders , etc.

But as I said, join our group at https: Very good article and encouraging. How can one know which dividend stocks are good for this strategy? I have read that Cisco is now considering a dividend stock. You build up a list of the dividend stocks and then check their options. Exclude those which are thinly traded, trade those which have nice options. Out of my list of 30 dividend stocks I now have approx. Thank you for responding to me I really appreciate it.

So on the slowest of 30 or so stocks you do not own any of them correct? On my trading account no, I do not own them, unless I get assigned, then I own them for a while, collect dividends, and sell covered calls until I get assigned again and sell the stock. Then I start selling puts again. Does your broker require that you have money in your account to buy the stock if the Stock goes below the strike price for the put you just sold?

I have a margin account so no, they only require the maintenance which is approx. In my ROTH IRA account which cannot use margin I have to have the entire amount in cash to cover the trade. It quite irony that she started with nothing, made tons of money and ended up in fraudulent activities. I hope I would never end up like that as it undermines all her claims and credibility. Hello Martin, Very nice article on put selling. I started with stocks trading 10 years ago and last 5 years I have been trading only options.

I have been to futures as well. Now, I am concentrating on credit strategies including put selling. So, I am doing both straddle and put selling. Looking at your past history, it appears that you are selling puts during the earnings season based on symbols and s against it and I see only SWY or SPX as regular trading.

Was this your strategy? Due to margin constraint, I am looking for a few stocks that I can trade for put selling on regular basis. Would you be able to suggest some. I used to trade options with underlying stocks and made nice money, later switched to SPX, lost that money, so I am back to trading options against stocks and making money again.

I trade against dividend paying stocks in case I get assigned I do not mind buying those stocks, holding them, collecting dividends, and selling covered calls. If you want, you can join our trading group on Facebook where other traders and I are posting our trades basically on-line before we place them I usually post a trade in the evening before the trading day, others are posting even during the day , so it is not only my trades, but also trades of other members.

There you can see what we trade, which stocks, what DTE, what premium, and how we manage those trades. And if you like the trade, you can mirror it on your own. I usually recommend to do it in a paper trading account if you want to see first how we are doing before you commit cash, but, our trades are real life trades so we are committing our own money, so you can take some trust in those trades.

Nevertheless you still need to do your own homework and not just blindly copying a trade. You need to understand the trade, how you can make money and how you can lose money in that trade. To maximize your premium when selling your puts, you want volatility to be high.

Hi Ken, I love sell puts on stocks that I want to own when volatility is high too. What volatility indicator are you referring to? Volatility percentile, implied volatility or IV rank? ED, I do not use screeners. I have a watch list of stocks I want to trade options against them and then look for a good set up among those stocks. If I see a stock breaking down I sell calls, call spreads or buy puts, if I see a stock breaking up I sell puts, put spreads or buy calls.

Screeners will not provide you with the whole picture and may be misleading. Nice write-up on selling puts. Brent, I agree very much with you. I like put selling a lot too and when selling against stocks I like to own, all the stress is gone and it is a lot easier to trade.

Thanks for stopping by and reading! Always a win-win strategy. I would love to help people by teaching them this. Thank you for commenting.

You can join our group of traders on Facebook and help novice traders who are just following or watching our trading, or you can contribute in this blog if you want. Definitely, trading options is a great tool and I believe all investors should learn it and use it.

So stocks with not rich premiums short term and in my ROTH IRA account I trade them between 30 to 45 days to expiration.

In my trading account I trade 1 to 3 weeks expiration trades. But this is a different strategy. I do not own the stocks in this account and also prevent owning them if possible.

This post is not about this account but rather my dividend investing account in ROTH. Your email address will not be published. Leave this field empty. Notify me of follow-up comments by email.

Notify me of new posts by email. Add your blog to Blog Directory. Why selling puts against dividend paying stocks is a win-win strategy There is a simple answer to this question, but I will make it a bit longer and complicated.

Unfortunately they have to tell you that because the law forces them. Business Insider If you understand basics of options, how you can make money using them, you will find out, that trading options is very easy, simple and not risky at all.

How to change your mindset to an option trader? Rule number two — choose a strike price you are OK to pay for the stock in case you get assigned when you will be forced to buy a stock Rule number three — if you have a small account and cannot afford more contracts than one, choose as long expiration as possible to collect at least 1.

Do not worry, if the stock went ITM in the money, meaning below strike you have two options how to defend your premium: You do not want the stock yet — roll the option down. You do not want to bother with rolling options, take the stock. What you need to know? I like ThinkorSwim platform, but you can use any other platform Fifth, you need cash for cash secured puts or margin approval for naked puts.

So what is an option?

When selling puts against dividend stocks, there are only two possible outputs: An option expires and you keep the premium. Click to share on Facebook Opens in new window Click to share on Twitter Opens in new window Click to email this to a friend Opens in new window. March 11, at 5: March 11, at 2: November 29, at 2: November 29, at 8: September 24, at September 25, at 2: August 24, at 8: August 25, at 7: August 25, at 8: June 18, at 6: June 18, at 7: June 5, at 3: June 5, at 2: May 4, at January 27, at 2: July 25, at January 27, at 3: July 11, at July 14, at 9: Brent All About Interest says: June 9, at 3: June 9, at 8: August 26, at August 29, at 9: April 16, at 9: Leave a Reply Cancel reply Your email address will not be published.

What do you think? What do you do with dividends? I withdraw them and spend them for a living I withdraw them and invest them in other assets I reinvest them using DRIP I reinvest them by selecting other stocks I do not invest in dividend stocks I withdraw a portion and reinvest the rest View Results.

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