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Question from an options newbie:

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bkluck   Monday, 01/13/14 12:46:29 PM
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Question from an options newbie:

I've been an owner of NRP (coal) for many years. It is a high-yielder, and with by reinvesting, my return (even thru the recent drop in share price) is quite good, and I have decided to add to my position.

So I could just go buy the stock (currently trading at 16.51, down significantly over the past few days), since overall I feel it is still a great investment. However, the more I research options, it seems like I could do a bit better.

So what I did this morning was to sell the Feb 17.50 put, for 1.55. This put $155 in my pocket, and guarantees I get put the stock. Yes, I get put at 17.50, but with the premium, I'm really in the stock at 15.95, a 4% discount from the current level.

Since I was going to buy the stock anyway (likely at 16.51), is there a hole in my strategy?

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