Money 101

[Toofuzzy]

Most option trading " systems" will tell you that you can make 5 to 10% per month selling put or call spreads " with greater than 80 to 90 % success rate".

Doesnt that sound wonderful !

The problem is ...... you are making $50 for $500 at risk.

Wait isnt that a great return? 10% / month ?

Well think about it for a moment .........

You have to be right 10 times for every time that you are wrong ..... just to break even.

Doesnt sound so good now does it.

And it is a LOT of work finding positions to write. It becomes a job.

They can talk all they want about closing losing positions to reduce losses ...good luck.

Instead

Make a list of what you would like to own
Sell a put at the price you are willing to buy it or lower 6 months to a year out.
If it gets put to you ..... well you would have bought it anyway.

Then if the price isnt to far below the price you bought it .....sell calls 10% or more higher 6 months or more out and keep doing that till it is called from you.

Rince and repete.

Not always
Toofuzzy

PS sometimes something will drop 50% before the put expires .....either you buy the put back before it gets there or you buy the stock for a lot more than the current price...... but less than you would have bought it for because of the Put premium you took in.