Friday, October 24, 2014

Whoa.. haven't updated since.. 2012!

Been looking for deep value buys but hard to find things to dive deep into, thus since end 2013 been exploring trading US stock options with a small % of  my portfolio.

Dang interesting them stock options, even to an investor (ie. not as a trading tool).
An example and contrast vs "traditional stock investing"
1. Traditional stock investing on Nestle
a. Place order to buy at 60 for 200 units, then wait for order to be filled.
b. IF order not filled for the day, repeat until filled.
c. Bottom line: Can be long time before being filled... "wait till neck also long", while not making $
2. Selling Naked Puts option on Nestle strike price $60
a. Place order to sell naked PUT Nov 2 contracts (200 units), for $0.10
b. Order filled as the "cost of insurance" is comparatively low & i get $0.10 *2 contract *100 units per contract -commissions/fees in pocket
Note: Put buyers may buy Naked Puts as an insurance hedge against falls in their stock's price
ie. Put seller is contractually obligated to buy the stocks at contracted strike price if forced by Put buyer
c. IF Nestle doesn't fall to $60 by contract date (Nov), i keep the premium paid by buyer
Repeat 2a. for next month until Nestle falls to $60
d. IF Nestle falls to $60 by contract date, i get "assigned" and must buy Nestle at $60.. dang! :P
e. Bottom line: While waiting / fishing for my value price, i get premiums + when i get hit with an assignment, dang.. i'm so sad.. bwhahaah.

Just a thought :)

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