A.I.M. Users Bulletin Board

[SFSecurity]

Hi Toofuzzy, You'd be better off to sell PUTs to create new positions. If you select a price only a small amount lower than the current price then you would get it for less than the average current price, and if it rockets up so the PUT is never assigned to you, you still get the money you sold it for.

As to selling covered CALLs, selecting a price that is higher than AIM would have you sell a portion for would allow you to make more money than AIM, by itself, would earn you. Yes, the price might rocket up well beyond what the CALL price is but given my experience with GUSH, the amount collected from the PUTs and the CALL was more than just AIM would have gotten you.

The other advantage to selling PUTs and CALLs is that you do not have to monitor the price on a frequent basis to get the price you chose. It happens or it doesn't, but you get the money from the sale regardless.

Where you have to be extra careful is selling PUTs when a position enters a long term down trend. Selling a CALL in that situation is just collecting gravy but a PUT might get you assigned a position that would not turn back up for years to come. Take a look at the history of ProShares UltraPro Short MidCap400 (SMDD) as one example of the potential problem.

Best,

Allen