Selling puts in your investment account can be a tremendous strategy for generating reliable income while taking on less risk than more traditional income strategies like buying and holding dividend stocks. The trading approach is made possible by selling a put option to speculators who either: 1. Think that the underlying stock or exchange-traded fund (ETF) is headed lower, or 2. Want to hedge their current exposure.#-ad_banner-# From our perspective as option sellers, one of the most important decisions is what types of securities to sell puts against. Specifically, some traders struggle with the… Read More
Selling puts in your investment account can be a tremendous strategy for generating reliable income while taking on less risk than more traditional income strategies like buying and holding dividend stocks. The trading approach is made possible by selling a put option to speculators who either: 1. Think that the underlying stock or exchange-traded fund (ETF) is headed lower, or 2. Want to hedge their current exposure.#-ad_banner-# From our perspective as option sellers, one of the most important decisions is what types of securities to sell puts against. Specifically, some traders struggle with the decision of whether to sell puts against individual stocks (which give them a risk/return profile that is affected by the individual company dynamics), or against broad indexes or ETFs (which offer more diversification). To determine where you should put your capital to work, let’s look at the driving forces for both risk and returns based on both of these approaches. Volatility And Diversification One of the primary benefits of investing in an ETF as opposed to individual stock positions is that the ETF gives you instant diversification. However, keep in mind that not all ETFs are as diversified as… Read More