Selling Open Fundamentals

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Selling Open Fundamentals THE MOST CONSERVATIVE OPTION TRADING STRATEGY

Transcript of Selling Open Fundamentals

Page 1: Selling Open Fundamentals

Selling Open FundamentalsTHE MOST CONSERVATIVE OPTION TRADING STRATEGY

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Fundamentals

Sell Long (Call) or Sell Short (Put) depending overall Premium. Premium is your gain (per share) minus the trade commission. You may sell one (1) lot for each 100 shares that you own.

Quote Example: AT&T Inc. (T)

$33.2654 

0.0054

0.02%If you are holding 500 shares ($16,632) you own five round lots and may sell five (5) positions.

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Select Timeframe (Type)

Weigh relative value Call/Put AND Time (Type)

Higher Premium paid for Puts vs Calls

Trade at the Strike Price

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Relative Transaction Value

Potential value of ~$250 premium for five positions (500x0.52-[commission]) over just a two week period (expiring Dec 4).

Considerations. Your enemy is the execution of the option and having your shares called or put. When your underlying shares are called the owner of the option purchases your underlying shares at a price

below market. When your underlying shares are Put, you as the owner of the underlying shares, are forced to buy the shares at

(usually) a price above the market rate.Mitigate risks by selling options on stocks that you understand and follow, this enhances your ability to anticipate the stock behavior in different conditions.

Useful Articles-

http://www.forbes.com/sites/baldwin/2012/07/18/be-like-warren-buffett-sell-put-options/

http://www.investopedia.com/articles/optioninvestor/10/sell-puts-benefit-any-market.asp