Replies to post #628 on Micron Technology (MU)

[Leirum]

Selling Puts is a strategy used with stocks, that one would like to own

For Example MU has a clear trend and it's volatility is calculable. So, Mu would be a stock you like to trade or own.


Let me say you want to buy 200 shs. Now you start to buy 100 Shares at $ 32.--

Now, you sell a put at $ 30.-- which gives you an income from the premium you get. If the stock should fall back to this Level, you will be putted at with the stock, but actually you had so or so in mind to purchase this stock.

If putted at: The purchase Price of the stock would be $ 30.-- less the premium you already received.

If not putted at, you just generate an income from the premium.

Now, you do the same with writing a covered call for your 100 shs. Let's say you write a call with strike $ 35.--
Here as well you get a premium. Now of course, if the stock would go above the strike you wrote you must give the stock away, but you would have made a Profit, as you sold the stock higher than you bought ($ 3.- plus plus premium) and as well the premium you cashed in from the put sold.