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Easy Money Selling Options
The stock market is in pause mode. You own several stocks that you want to keep long term. How can you make a little extra money with your portfolio? It is possible to make easy money selling options when you already own the stock. A covered option is one in which are selling a call or a put on a stock and you own it. A long options strategy can result in easy money selling options. This strategy involves selling calls or puts on stocks that you own.
What Is a Call?
A call contract gives the buyer the right to purchase a stock at a set price up until the expiration of the contract. The selling is paid a premium for taking on the risk that the stock may go up substantially in price and that he will miss out on those gains. If the seller is selling short he does not own the stock and then his risk is bigger. The seller is obligated to sell if the buyer so chooses.
What Is a Put?
In a put contract the buyer purchases the right to sell a stock at a set price and the seller gets a premium for taking on the risk of a big drop in the price of the stock. Someone who owns a stock will lose if the price falls substantially but is covered because he already has the stock to sell. A person selling uncovered puts stands to lose as well and will need to buy at a price higher than the now-current market and lose when selling at the now-lower market price.
Familiarity with Your Stocks
There are stocks that routinely rise and fall within a predictable channel. You know this if you have held such a stock for year. When the stock is close to its usual upper limit selling a covered call option will provide you with a little cash as the stock cycles back downward in its every repeating cycle. The only risk that you have is if the stock suddenly and unpredictably goes way up in price. The easy money selling options part of this scenario is that you know the stock and its characteristics and know that the likelihood of a big jump in price is slim. This is a strategy that you can employ over and over again each time the stock cycles up and down within its predictable trading channel.
Another way to make easy money selling options is writing puts. Writing is just another word for selling. In this case the stock that you own is nearing its usual lower limit before cycling back up. You sell puts on the stock and get paid a nice chunk of change on top of the appreciation of your portfolio as the stock predictably rises again.
Fundamentals and Market Sentiment
Those who routinely make easy money selling options typically take a conservative approach. They only sell calls or puts when market and stock fundamentals are on their side. And they keep an eye on the market for changes in sentiment based on fear or greed as these factors may temporarily drive stock prices beyond what fundamentals dictate.
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5. How can you make a little extra
money with your portfolio?
6. It is possible to make easy money
selling options when you already
own the stock.
7. A covered option is one in which
are selling a call or a put on a
stock and you own it.
8. A long options strategy can result
in easy money selling options.
16. In a put contract the buyer
purchases the right to sell a stock
at a set price and the seller gets a
premium for taking on the risk of
a big drop in the price of the
stock.
17. Someone who owns a stock will
lose if the price falls substantially
but is covered because he already
has the stock to sell.
18. A person selling uncovered puts
stands to lose as well and will
need to buy at a price higher than
the now-current market and lose
when selling at the now-lower
market price.
20. There are stocks that routinely
rise and fall within a predictable
channel.
21. You know this if you have held
such a stock for year.
22. When the stock is close to its
usual upper limit selling a covered
call option will provide you with a
little cash as the stock cycles back
downward in its every repeating
cycle.
23. The only risk that you have is if
the stock suddenly and
unpredictably goes way up in
price.
24. The easy money selling options
part of this scenario is that you
know the stock and its
characteristics and know that the
likelihood of a big jump in price is
slim.
25. This is a strategy that you can
employ over and over again each
time the stock cycles up and down
within its predictable trading
channel.
26. Another way to make easy money
selling options is writing puts.
31. Those who routinely make easy
money selling options typically
take a conservative approach.
32. They only sell calls or puts when
market and stock fundamentals
are on their side.
33. And they keep an eye on the
market for changes in sentiment
based on fear or greed as these
factors may temporarily drive
stock prices beyond what
fundamentals dictate.
34. Smart options traders stay out of
trades that they do not
understand and only take the
trades that clearly will lead to easy
money selling options.
