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Talking stocks, trading, and investing in general

Discussion in 'Business, Careers & Education' started by mikeman, Feb 2, 2011.

  1. RedLeg

    RedLeg Senior member

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    Will occasionally, but always cash secured out of the money.

    If I want to get in a stock, but I'm not sure it's bottomed, I'll consider putting half a position on, then writing puts on the other half. Stock drops a bit more, I get the stock at strike, plus the premium, lowering my entry even more. Stock bounces, consider if you want to put the other half of your position on. If not, you can pocket the premium or roll into calls.
     


  2. idfnl

    idfnl Senior member

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    That's a decent strategy. Need to noodle on that.

    So if I take 100 shares of a stock I own at $100, write a put option on it at 90, and then it drops below strike at expiration to say 80, am I responsible for it at the strike price of 90, or do my losses extend down to 80? I've never understood selling puts from this perspective, is my downside capped or is it 0?

    The other vehicle I wish existed is a service that aggregates small positions among multiple owners into contracts. In essence, for example, I own 50 shares of PCYC, I don't want to own more, but I also have 6k invested that I'd like to put to work... I wish there was a service that found someone(s) with another 50 shares so I could sell the contract.
     
    Last edited: Aug 5, 2014


  3. RedLeg

    RedLeg Senior member

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    You would be responsible for buying the stock at $90, so your loss you be $10 per share less the premium you received. Your max loss would be $90 per share less the premium (if the stock went to 0).

    While the downside seems steep, it's not as bad as if I had bought the 100 additional shares at $100 per share.

    Key is that I do not write more puts than I am comfortable buying outright. I always have the cash set aside.
     


  4. otc

    otc Senior member

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    I'd like to get naked with the chick who was trying to sell me on Herbalife
     


  5. SkinnyGoomba

    SkinnyGoomba Senior member

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  6. idfnl

    idfnl Senior member

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    I'm confused, I'm reading 2 things. You said my loss would be $10 per share, but do you mean the $10 down to $80 or the $10 between $90-100? I think you mean 80, but I want to make sure.
     


  7. SkinnyGoomba

    SkinnyGoomba Senior member

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    Writing a put and buying a stock expose you to the same losses, but much more so. Buying a put and buying a stock covers your loss. Selling short and writing a put covers you.
     


  8. RedLeg

    RedLeg Senior member

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    Your loss would be the drop from 90 to 80, less the premium you collect when writing the option
     


  9. idfnl

    idfnl Senior member

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    Thanks. Calls remain the better bet.
     


  10. SkinnyGoomba

    SkinnyGoomba Senior member

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    Is it me, or is Russia like the annoying kid who sits in the corner and shoots spit balls.
     


  11. Master-Classter

    Master-Classter Senior member

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    in mutha russea spit balls shoot you!


    ha I joke. KGB shoots you. That part serious.
     


  12. GreenFrog

    GreenFrog Senior member

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    Looking like it could be an ugly day today.

    Fairly red already in pre-mkt trading.
     


  13. idfnl

    idfnl Senior member

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    It's turned green, but I don't expect it to hold. The market gets a few hours of momentum only to trigger more selling.
     


  14. amerikajinda

    amerikajinda Senior member

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    Now's a good time to buy since stocks have taken a hit recently due to ongoing geopolitical tensions. Just placed my order for some EMC, T. Rowe Price, Nielsen and Dentsply. Will buy more depending on what markets do today.

    [​IMG]
     
    Last edited: Aug 8, 2014


  15. idfnl

    idfnl Senior member

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    Seems early to me. I think we have another 500 points to go. I've nibbled in case I'm wrong but need to see a more substantial bottom before larger moves.
     
    Last edited: Aug 8, 2014


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