(03-17-2020, 09:33 AM)john Wrote: T currently trading @ ~$33No, selling a put on T is NOT chasing premium provided you are completely comfortable adding some more shares.
Selling April 17 T put @40 strike are $7.50
Selling Jun 19 T put @40 strike are $8.00
T hasn't traded above $40 in three years the 20 year chart only shows it above $40 a few times.
This would be "chasing premiums scenario"
However if you got assigned it would mean the market vastly improved?
Please critique my theory
edit to add I own T already mostly purchased around $33
Pull up this example.
Weyerhauser (WY) The stock is volatile as hell.
Check out an APR 17 Put, or anything a little out of the money from 2-4 weeks out. See that 5-10% instant return? A stable stock during times of low volatility only yields 1-1 1/2% return for your risk assuming it expires worthless. There is a good reason you are getting that big premium.
John doesn't desire to own 100 shares of WY. He is just chasing the big yield. John might be trying to dump the stock before it's even assigned lol. John is just gamblng for option premiums.
fenders53 is building a position in WY, (BTW he just loves WY at this price with the huge Div for a leader in the building materials industry). It took me five tries to own WY with my initial shares. Every time it dipped I sold a put in a bull market and collected a lot of premiums. These assigned shares are down now but I'm still good.
When you get assigned shares you didn't want it's a completely different story. Hope that helped. When the market is is freefall you WILL get assigned. Be 100% OK with that outcome up front and you're just collecting premiums and getting shares cheaper eventually. "I'll just sell a covered call and maybe escape" will fail you if you sell puts on junk regularly.