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?
