Option Education

[Toofuzzy]

Hi bkluck

You may want to sell a slightly out of the money put instead. You will take in more TIME premium (though lower actual premium) and you will need just a little less margin in your account.

Lets say a stock is at 50 and you are willing to buy at 45 and you are also willing to buy even more at 40

Sell a 45 put six months or a year out.

If the stock drops to 45 before expiration, buy the stock, it may go back up before expiration and you would miss the opportunity.

If it stays down till expiration or drops further you would have bought more at 40 and hopefully you took in enough premium to bring the price down to that or close.

The above assumes you have enough funds for an additional purchase.

Toofuzzy