Tackle Today: About the fear of Naked Puts
December 13, 2018
≈ Your happy place. ≈
Selling Naked Puts can be intimidating for new traders.
The idea of entering a position that has a RISK OF ASSIGNMENT makes them avoid one of the most common cashflow strategies in the financial markets.
For them, getting assigned is like a punishment. A bad omen.
Far from the truth.
Here are two tips that will help you trade the Naked Puts and not feel damned when assigned:
1. Only sell puts against stocks you will be HAPPY to hold in your portfolio.
2. Sell puts at the strike price you would be HAPPY to buy the stock at.
3. Sell the number of contracts that corresponds to the number of shares you would hold in your portfolio in case of assignment. That must be in accordance with your money management rules. For example, if the max number of shares you can hold is 200, sell no more than 2 contracts.
See? We used the word HAPPY twice.
On January 2019 we will be releasing a brand new edition of the Tackle 25. The best candidates for cash flow strategies can be found there. Stay tuned.
Follow the tips we just gave you and all “losing” trades will be winning trades. You can look your family in their eyes and proudly say: “I got assigned.”
That’s a good omen.
Chart of the Day
Chart of the day – USO (United States Oil Fund)
USO is an ETF. Traders are cautious due to the ugliness of the chart above but if you are an investor looking for cash flow, you will agree that beauty is in the eye of the beholder. It is a relatively inexpensive vehicle with a nice cashflow expectation. Cash flowing on USO and with the proceedings buying some precious metals could be a happy place for many traders.
Answer these three simple questions:
– Will you be happy to hold USO in your portfolio?
– At which price you would be happy to buy its shares?
– How many shares can you hold in your portfolio at that price?
Layout specific rules to take advantage of the put selling.
Video of the Day
What is a Call Option
Call options are a contract that give the buyer of a call option the right, but not the obligation, to buy an underlying asset at a specified price called the strike price, within a (…)
Today’s Lineup
ROOKIE CORNER
The Big Market “Dummy”
What a wild couple of weeks we have had in the markets! We have seen volatility jump up and we have seen a rather large range in the major indexes. This kind of volatility for shorter-term experienced traders is awesome. However, what about the longer perspective newer traders? Do they see this volatility as fun? I have heard from more than a few rookie traders that this volatility is keeping them up at night.
Traders Lounge 11am EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
Cashflow Club 8:30PM EST
Held every Thursday before Friday’s option contract expirations, this show helps you perfect your favorite cashflow strategies.
Halftime Report 12:30pm EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.
Market Recap 4:30pm EST
The Market Recap is designed to give you a quick overview of the day that was. While brief, this report is designed to cover all of the major events that drove the markets that day and help you plan for the trading day ahead.
