Why Selling Options Can Benefit You

[Marty Miller]

There are a lot of benefits to selling options in the stock market.
Some of the things selling options lets you do are.
1. Make Money In A Confused Market
When stocks are volatile and have no clue which direction they want to
go selling options lets you make a profit. Instead of trying to
predict what will happen, you can simply sell options and make money
by predicting where a stock will likely not go.
This isn't that hard in volatile markets considering stocks can stay
range bound for a long time.
2. Get Into Strong Stocks
You can also use it to get into strong long term plays by selling
puts. For Example, say you really like stock XYZ at $20. You believe
that the stock is a good long term play and will eventually be worth
much more than $20.
But you might want to get it at a better price, or you might believe
that the market is going to have a correction. If that is the case you
might want to consider selling the $15 put for $3. This way you would
make $3 up front and if the stock falls to $15 or lower within a
certain time frame you would be obligated to buy it at $15.
If you think the stock is a great deal and worth much more than $15
this method could be like getting paid to get into a great deal.
3. Making a Monthly Income Off Stocks
If you are already in a stock you can sell calls off of your stocks to
create a monthly income. For example if you are already in stock XYZ
which is trading at $20 you could sell the $25 call for $2 and walk
away with the premium. Of course if the stock goes above $25 you would
have to sell it at $25.
So selling covered calls is a strategy best done when stocks are not
trending higher.

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