Fossil420's Hookah Lounge

[Lord DarkHelmet]

The term is Cash secured equity puts.

It is a pretty common strategy and very risk averse.

Essentially, you are getting paid for a stock that you would like to buy at a lower price. If the price doesn't hit, you walk away with extra "credit" and can re-establish the position the next month. If the strike you set expires in-the-money (ITM), you now own the stock, but were paid a "premium" in the process.

The caveat (downside) is that if the stock you sell (write) a Put option on goes far enough below your strike to more than cancel out your premium you received for the transaction, you can actually lose money. But then you own a stock you wanted anyway and can sell it at your convenience.

Never write a PUT (Cash secured equity put) on a security you don't want to own. And...never right to many contract that you can't cover with your capital balance. Otherwise, you will have a naked put and the margin requirements will go up dramatically.

It is a good strategy. Just never have done it because I don't want to own stock...lol.